Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

MESSAGE FROM THE QUEEN

HER MAJESTY QUEEN ELIZABETH THE QUEEN MOTHER

The Vice-Chamberlain of the Household: reported Her Majesty's Answer to a loyal and dutiful address as follows:
I thank you most sincerely for your loyal and dutiful address on the occasion of the 90th birthday of Her Majesty Queen Elizabeth the Queen Mother. I am deeply moved by this expression of your great pleasure on this joyful occasion and I welcome your intention to send a message to Her Majesty Queen Elizabeth the Queen Mother offering your cordial congratulations and expressing your warmest desire for her long continuing good health and happiness.

PRIVATE BUSINESS

RIVER TEES BARRAGE AND CROSSING BILL [Lords]

Order for Third Reading read.

Queen's Consent, on behalf of the Crown, signified.

Read the Third time and passed, with amendments.

HASMONEAN HIGH SCHOOL BILL [Lords]

Read the Third time, and passed.

SOUTHAMPTON RAPID TRANSIT BILL [LORDS]

Motion made,
That the Promoters of the Southampton Rapid Transit Bill [Lords] shall have leave to suspend proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office of their intention to suspend further proceedings not later than the day before the close of the present Session and that all Fees due on the Bill up to that date be paid;
That if the Bill is brought from the Lords in the next Session, the Agents for the Bill shall deposit in the Private Bill Office a declaration signed by them stating that the Bill is the same, in every respect, as the Bill which was brought from the Lords in the present Session;
That as soon as a certificate by one of the Clerks in the Private Bill Office, that such a declaration has been so deposited, has been laid upon the Table of the House, the Bill shall be deemed to have been read the first and shall be ordered to be read a second time;
That the Petitions against the Bill presented in the present Session which stand referred to the Committee on the Bill shall stand referred to the Committee on the Bill in the next Session;
That no Petitioners shall be heard before the Committee on the Bill, unless their Petition has been presented within the time limited within the present Session or deposited pursuant to paragraph (b) of Standing Order 126 relating to Private Business;
That, in relation to the Bill, Standing Order 127 relating to Private Business shall have effect as if the words 'under Standing Order 126 (Reference to committee of petitions against Bill)' were omitted;

That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during the present Session;
That these Orders be Standing Orders of the House.—[The Chairman of Ways and Means.]

Hon. Members: Object.

To be considered tomorrow.

Oral Answers to Questions — DEFENCE

NATO Summit

Mr. Allen McKay: To ask the Secretary of State for Defence if he will make a statement on the defence implications of decisions taken at the NATO summit on 5 and 6 July.

The Secretary of State for Defence (Mr. Tom King): The purpose of the London summit was to preserve the fundamentals of NATO while adapting the alliance to the new circumstances in Europe and to reassure the Soviet Union that a NATO including a united Germany represented no threat to them. The agreement between Chancellor Kohl and President Gorbachev yesterday confirms this success of the London summit.

Mr. McKay: Two lines of NATO's press release state
that there are now circumstances in which nuclear retaliation in response to military action might be discounted.
What is the difference between the new policy and the old policy of flexible response?

Mr. King: The hon. Gentleman is aware that the declaration makes a number of references to nuclear weapons. It states that none of the NATO weapons will be used except in self-defence and that we seek the lowest and most stable level of nuclear forces needed to secure the prevention of war. Nuclear weapons will have an essential role in the overall strategy to prevent war in the way in which the hon. Gentleman described. NATO added that the weapons will be
truly weapons of last resort.
That is a clearer definition of the nuclear strategy and emphasises the point that many Opposition Members still do not appreciate—that nuclear weapons are not for fighting a war, they are to prevent war.

Mr. Cormack: During this period of uncertainty for those in our armed forces, will my right hon. Friend do everything possible to stress the nation's sense of gratitude and obligation to them for what they have done and for their contribution to the peace that we are now seeing in prospect? Will he also do everything possible to reassure them that this House will not forget them in their difficulties in the future?

Mr. King: I am grateful to my hon. Friend and I shall certainly seek to do that. My hon. Friend has made an important point. I know that he did not mean this, and I do not say this, as some form of valedictory address. Although the position in central Europe has changed, our situation in needing to ensure a certain basic level of defences against the eventualities that we hope would not arise, but which could arise, mean that our defences will


have a continuing and important role and will offer a continuing and important career for those who give their lives and service to them.

Mr. Menzies Campbell: If nuclear weapons are weapons of last resort and not for fighting wars, is not the Government's inclination to deploy the tactical air-to-surface missile on behalf of the United States a decision that should be scrapped immediately? Does not it also bring into considerable doubt the need for tactical air-to-surface missiles to be deployed by the NATO alliance?

Mr. King: After the manifest success of the NATO summit, I am surprised that the hon. and learned Gentleman should seek to challenge head-on one of the statements of NATO policy, which is that
the Alliance must maintain for the foreseeable future an appropriate mix of nuclear and conventional forces based in Europe and kept up to date where necessary.
He does so at the very moment when we are celebrating the success of the NATO strategy and on the day after one of the objectives of NATO strategy for 40 years—to seek a united Germany within NATO has been achieved. I am surprised that the hon. and learned Gentleman should query the unanimous agreement on that strategy.

Mr. David Martin: Will my right hon. Friend continue to make clear the necessity for strong defence in the future not only for short-term foreseeable events but for long-term unforeseeable ones? Does he agree that it would be criminal folly to reduce our defences, including nuclear weapons, to a level lower than any eventuality, however unforeseeable, might demand?

Mr. King: I am grateful to my hon. Friend. I know that in saying that, he also recognises that circumstances are changing and that one of the most important aspects is that NATO must adapt. One of the greatest strengths of recent events and one of the values of NATO that was shown yesterday is that after the NATO summit, after the NATO declaration and after the visit of the secretary general to Moscow, President Gorbachev felt confident enough to move because he knew that he was dealing with an alliance which had the strength to deliver.

Mr. Rogers: In view of the Secretary of State's description of the talks as unanimous and successful, does he intend to make a full statement to the House on the implications of the unanimous decisions made and of "Options for Change", or shall we have to wait for a statement to be made during the recess?

Mr. King: No. The House is well aware of the outcome of the NATO summit and the Leader of the Opposition has already made certain comments in the House about it. Indeed, I noticed that in New York the Leader of the Opposition, referring to the changes and the positive outcome of the NATO summit, said that it was a good time to be alive. I am not sure whether that spirit has spread to the hon. Member for Rhondda (Mr. Rogers).

Defence Commitments (Europe)

Mr. Cran: To ask the Secretary of State for Defence what progress is being made in his Department's review of Britain's defence commitments in Europe.

Mr. Tom King: We are considering options for change in the scale and deployment of our armed forces and their supporting structures in the light of the changing international circumstances.

Mr. Cran: Does my right hon. Friend agree that despite Mr. Gorbachev's good intentions—and there is no reason to doubt them—The Times was correct to draw attention today to the uncertain nature of Soviet politics and on another occasion to the fluid situation in eastern Europe? Against that background, does he agree that any defence cuts should be gradual and should take into account long-term rather than short-term political developments?

Mr. King: I certainly agree with the importance of recognising that while much has changed, some elements endure. Our responsibilities in other parts of the world, whether in the Falklands, Belize, Cyprus or Northern Ireland, have not changed in any way. We must continue to recognise those elements and the need to maintain our defences. The one element that I would add to what my hon. Friend said is that it is also important that we work in close partnership with the NATO alliance and consult it about any changes that we might have in mind.

Mr. Douglas: Will the Secretary of State confirm that changing circumstances require changing strategies, particularly in relation to nuclear weapons? If it is now NATO strategy that nuclear weapons should be weapons of last resort, why is it necessary for at least three countries in the alliance to possess them? Why should we not be content—if we can be content at all with nuclear weapons—with one nation, the United States, having sole possession of strategic nuclear weapons?

Mr. King: In the end a Government must take responsibility for the defence of their country. We believe that nuclear weapons have been for this country, as they have for others, the ultimate instrument of war prevention. We believe that nuclear weapons have saved millions and millions of lives. That is the key reason why Europe has just enjoyed the longest period of peace this century. It is against that background that we believe it is sensible to maintain a nuclear deterrent.

Mr. Maxwell-Hyslop: Will my right hon. Friend constantly remind the House that whereas the time sequence for developing new nuclear weapons and keeping current nuclear weapons effective is very long, the time sequence in which international political relationships can change is almost immediate? Therefore we must never bring about a situation whereby the Russian military deposing Mr. Gorbachev could leave us defenceless, effectively, against that changed situation.

Mr. King: I am grateful to my hon. Friend for emphasising the need for a certain prudence. No one could have observed the events of the past year without recognising the truth of what he has said. The headlong process of change that has taken place in recent months could alter. Today's announcement, encouraging as it is, might easily have gone the other way and then there could have been a great deal of tension in Europe. If the Soviet military establishment had finally decided that it could not accept a united Germany in NATO, we would face a different situation. The very fact that we believed that in


the end the Soviet Union would recognise the rights of the German people to self-determination and to choose to which alliance they belonged is extremely important.

Nuclear Tests

Mr. Caborn: To ask the Secretary of State for Defence what nuclear tests have been carried out by NATO countries and France in the current year; and for what purpose.

The Minister of State for the Armed Forces (Mr. Archie Hamilton): The last United Kingdom nuclear test was in December 1989. Such tests are required to maintain the effectiveness of our nuclear weapons capability.
The French authorities have announced four and the United States three nuclear tests so far in 1990.

Mr. Caborn: I thank the Minister for that reply. Were those tests carried out in conjunction with tactical air-to-surface missiles? If so, does the Minister condone that, given that the threat has now been considerably reduced, if not removed? Will he also inform the House whether the Government intend to start progress towards a comprehensive worldwide nuclear test ban? That would be a significant step in enhancing the agreement reached yesterday and the decision would be received throughout the world as a progressive move towards further stabilisation.

Mr. Hamilton: The Government regard it as essential that we continue to test nuclear weapons so long as we remain a nuclear state, as we intend to do for the foreseeable future. That stand is unlike that of the Opposition, who have made it clear that they see no role for nuclear weapons and will negotiate them away as soon as they ever get into power. In those circumstances, we intend to continue to test nuclear weapons. We do not, of course, go into detail about the form that those tests take.
The Government have made it clear that we do not support the idea of a comprehensive test ban because we regard the testing of nuclear weapons as essential for the future development of our nuclear programme.

Sir Geoffrey Johnson Smith: Can my hon. Friend confirm that in recent years the Soviet air force has modernised its nuclear air capability and that it would be extremely foolish for us to deny ourselves similar opportunities other than as part of some international agreement?

Mr. Hamilton: Yes, that must be right. The Soviet Union will continue to be a highly nuclear-capable country for the foreseeable future. In those circumstances, it would be madness if we did not maintain our capability as well.

Weapons Development and Deployment

Mr. Terry Fields: To ask the Secretary of State for Defence when he last met his United States counterpart to discuss weapons development and deployment.

Mr. Tom King: I last met Mr. Cheney at the NATO nuclear planning group and the defence planning committee meetings in May. We discussed a wide range of current defence issues.

Mr. Fields: Although I might argue from a socialist perspective that imperialist, capitalist treaties and pacts

are worthless pieces of paper, can the Secretary of State tell the House whether the Government are serious about the non-proliferation treaty, or does he support the statement made by his hon. Friend the Minister of State for Defence Procurement who described it as a "worthless piece of paper" on 18 June in the House? Is not that a further example of the Thatcher-Ridley tendency of chauvinistic dislike and hatred for foreigners and all things foreign?

Mr. King: I am not sure what that contribution will do for the cause of the Leader of the Opposition in trying to persuade people in Washington that the Labour party is a very different animal now from that which some of its previous critics may have suggested. The hon. Gentleman's contribution said it all.

Mr. Roger King: Does my right hon. Friend agree that technology in the United States, particularly in military aircraft, has reached an all-time high with the stealth characteristics of those aircraft? Would it be possible for European aviation manufacturers to feature much of that stealth technology in the next generation of European fighter aircraft, and thus benefit from American research?

Mr. King: We seek to co-operate wherever possible in the European programme group on research and development in various collaborative projects and, where applicable, with the United States. Obviously, some of the skills of the United States are of great interest to us.

Mr. Boyes: Is the right hon. Gentleman aware that American ships will be carrying stocks of nerve gas, in the form of 100,000 artillery projectiles, from Nordenham in Germany through the English channel? The projected time for the movement is mid to late September when there are frequently severe gales in the English channel. When precisely will the movement take place, and what contingency plans does the right hon. Gentleman intend to make in case of a serious accident? The British public have a right to know, or do the Government simply not care?

Mr. King: I will see what information I can give the hon. Gentleman about that.

Mr. Latham: Regarding contact with United States counterparts on weapons development and deployment, does my right hon. Friend agree that it is excellent that Sir Peter Levene has managed to copy the American system of labelling spares' costs, resulting in a substantial reduction in costs to public funds?

Mr. King: Many of the innovations that Sir Peter Levene has brought to the public procurement process have been of tremendous benefit, and there is no question—this should unite the House, whatever levels of defence expenditure one may approve—but that whatever money is spent should be spent to the best effect.

Germany

Ms. Quin: To ask the Secretary of State for Defence what recent discussions he has had about the future defence role of Germany.

Mr. Tom King: In recent months I have had discussions on defence aspects of German unification with Dr. Stoltenberg, with other Defence Ministers in NATO, and with Marshal Yazov. The British Government have consistently supported the right of a united Germany to be


a full member of the NATO alliance, and we are delighted that Chancellor Kohl and President Gorbachev have now reached agreement on this crucial point.

Ms. Quin: Which Tory view is likely to prevail in future consideration of these matters? Will it be the views of the former Secretary of State for Trade and Industry and, presumably, the Prime Minister, or will it be wiser and more moderate counsels? Since the Soviet Union, despite its historic experience, has been able to change its stance towards the defence role of Germany, is not there a danger that only the United Kingdom will be negative and backward-looking?

Mr. King: The Foreign Secretary has made it clear that friendship and partnership are at the heart of British foreign policy and I can tell the House that friendship and partnership with Germany are also at the heart of our defence policy. That could never have been more obvious than during the past more than 40 years when 60,000 to 70,000 British troops and their families have been stationed in Germany. I am deeply grateful for the friendship and warmth of reception that they have had in Germany and for the close collaboration that has existed between us. That has perhaps never been more true than now when, under the vicious terrorist threat that they face, the outstanding co-operation of the German police and security forces has been beyond praise.

Mrs. Currie: Does my right hon. Friend agree that in this extraordinary week, in which President Gorbachev has withdrawn his objections to a united Germany joining NATO, the truth of the matter is that they could not beat us and therefore they are joining us? Does not it follow, therefore, that a united Germany should not be a weak member of NATO, but a strong one capable of playing a full part in the future?

Mr. King: There is absolutely no question but that my hon. Friend is right. Germany is an essential member of NATO. The Soviet Union has properly recognised, as we hoped that it would, that in the final analysis it is a matter for the democratic decision of the German people which alliance they join. Hon. Members will have noticed the phrase used by Chancellor Kohl and President Gorbachev, that their agreement yesterday recognised the
full and unrestricted sovereignty of a united Germany.
That has to be right.

Mr. O'Neill: Does the Secretary of State agree that yesterday's momentous decision, which we all welcome, has come about because of the persistence and patience of the Federal Republic of Germany and its allies in seeking to do deals with the Soviet Union? The outcome of the negotiations would not have been possible without the long-standing co-operation to which the Secretary of State alluded in respect of Britain and the federal republic. In those circumstances, is not it the more surprising that one of the right hon. Gentleman's colleagues tried to upset the apple cart with his ill-tempered outburst last week? Will the right hon. Gentleman reassure the House that there is now no one in the Tory Cabinet prepared to talk in terms of German revanchism in the way that his former colleague was prepared to do?

Hon. Members: What about the Prime Minister?

Mr. King: There is not much point in covering ground that has already been covered. I have made absolutely

clear the importance of our alliance with Germany. The hon. Gentleman will know that I have consistently made clear, on behalf of the Government, the belief that a united Germany should be in NATO and the hope that the people of a united Germany would so choose. It is Chancellor Kohl's clear belief that that is what they will choose after the German elections.

County Regiments

Mr. Speller: To ask the Secretary of State for Defence if he will make it his policy that under any Army reorganisation those county regiments with affiliated Territorial Army battalions bearing the same name will be retained.

Mr. Archie Hamilton: It is not yet possible to comment on the future of particular regiments or their organisation.

Mr. Speller: Does my hon. Friend agree that while military mergers are nothing new, it must be logical to encourage those regiments with centuries of local recruiting tradition to continue that tradition? Examples include the 11th Foot, the North Devonshire regiment, now the Devonshire and Dorset regiment, where the local groundswell of support is such that recruiting will continue even in times when it is more difficult than in other parts of the world.

Mr. Hamilton: Yes. Clearly, the ability of any regiment to recruit—and the ability of the Devon and Dorsets to get the support that they enjoy in their part of the country—will be taken into account in any reorganisation that we consider.

Mr. Thorne: In considering that matter, will my hon. Friend ensure that he does not overlook the claims of the Household Division or the Gurkhas? This year the brigade of Gurkhas celebrated 175 years of service to the British Crown and in the last war they raised 250,000 troops. If we overlooked them, I am sure that the British public would never forgive us.

Mr. Hamilton: I am well aware of the concern and respect that hon. Members have for the Gurkhas and the Household Division. We shall take that into account when we reconsider the shape that the Army should take in the future.

Mobile Forces

Mr. David Nicholson: To ask the Secretary of State for Defence what emphasis his Department places on mobile forces.

Mr. Archie Hamilton: As last week's summit declaration made clear, NATO forces will in future need to be highly mobile and versatile. We are currently examining options for change in our force structures to reflect new circumstances.

Mr. Nicholson: With reference to mobile forces, is my hon. Friend aware that I strongly support the point made a moment ago by my hon. Friend the Member for Ilford, South (Mr. Thorne) about the role of the Gurkhas? Will my hon. Friend take this opportunity to say something about developments in NATO's strategy in view of the exciting and reassuring developments in eastern Europe, and about the possibility of a NATO role out of area?

Mr. Hamilton: Yes, indeed. One of the advantages of the versatility and mobility alluded to is that they will enable the forces to be dual-hatted and play a role out of area as well as a reinforcement role in NATO.

Mr. Graham: The Minister mentioned versatility and mobility, but was it in order for a Royal Navy helicopter to be deployed at a Tory party event in my constituency, since, as has been admitted by the local Tory party, it was a fund-raising event for the Tories? Is that the new role for our military helicopters—to be used to prop up the Tories' fund-raising effort to try to win the next general election?

Mr. Hamilton: rose—[Interruption.]

Mr. Speaker: Order. I think the question was about mobile forces.

Mr. Hamilton: In as much as the supplementary question refers to mobility, I have answered the hon. Gentleman's question. As he well knows, that occasion was not laid on solely for the benefit of the Tory party. Serious sums of money were raised for other charities—[Interruption.]

Mr. Speaker: Order. The House must listen to the Minister's reply.

Mr. Hamilton: Serious sums of money were raised for other charities, but if it had been known that it was a Tory event, the contribution from the Royal Navy would not have been made.

Mr. Conway: When my hon. Friend has recovered from that formidable onslaught, will he give his attention to the role of the Territorial Army in the mobile forces and say whether in the light of developments, he believes that in future reservists and Territorial Army personnel will be able to play an even larger part in our mobile and specialist forces?

Mr. Hamilton: The Territorials and the reserves will certainly have an important role in terms of reinforcement of our role in NATO. We are considering that carefully under "Options for Change".

Low Flying

Mr. Wallace: To ask the Secretary of State for Defence what is the policy of his Department with regard to low-level military flying over the Isle of Man.

The Parliamentary Under-Secretary of State for Defence Procurement (Mr. Michael Neubert): Much of the Isle of Man falls within controlled airspace associated with Ronaldsway airport. Military aircraft do not generally carry out flying training at low level over the remainder of the island, although the RAF makes extensive use of the air weapons range off Jurby Head.

Mr. Wallace: I am grateful for that answer, but does the Minister accept that if having civilian air traffic over Ronaldsway airport is good cause for not having low-level military flying, that must also be a relevant consideration in low-level flying over my islands constituency, where the two important airports, at Kirkwall and Sumburgh, deal with not only a large amount of civilian inter-island traffic but with helicopter traffic from the North sea oil platforms? If this has been a relevant consideration in not

allowing low flying over the Isle of Man, will the hon. Gentleman reconsider the decision to increase low-level flying over Orkney and Shetland in recent years?

Mr. Neubert: Ronaldsway airport was a factor in the consideration but it was not, as the hon. Gentleman seeks to suggest, the only one. He knows that each case is considered on its merits.—I am sure that the people of Orkney and Shetland want to make their contribution to the defence of these islands. The Isle of Man does so by contributing the range for low-level flying, and other ranges—for example, RAF Tain—are equal contributors. The hon. Gentleman might have a word about that with his hon. Friend President Kennedy.

Mr. Bill Walker: Does my hon. Friend agree that in the Isle of Man or anywhere else in the United Kingdom, low-flying sorties, if they are to mean anything, have to be about 300 miles long so that pilots and navigators can undertake the necessary training to be able to operate in wartime conditions wherever they occur?

Mr. Neubert: My hon. Friend understands these matters much better than does the hon. Member for Orkney and Shetland (Mr. Wallace). It is true that the average sortie takes at least 300 to 500 miles, and it must encompass that distance to be worthwhile practice. It is our intention, through the United Kingdom low-flying system, to spread low-flying training as fairly and evenly as possible. Avoiding one area puts an unnecessary burden on other areas. [Interruption.]

Mr. Speaker: Order. I ask the House to settle down; a lot of background conversation is going on.

NATO Summit

Mr. Mullin: To ask the Secretary of State for Defence if he will make a statement on the defence implications of decisions taken at the NATO summit on 5 and 6 July.

Mr. Tom King: I refer the hon. Gentleman to the reply that I gave earlier to the hon. Member for Barnsley, West and Penistone (Mr. McKay).

Mr. Mullin: Now that it is alleged that our nuclear weapons are for use only as a last resort, are there any plans for doing away with our short-range nuclear weapons—I am talking about artillery and Lance—or am I being naive?

Mr. King: The hon. Gentleman would have done better to read the London declaration before he came to the House because it contains a specific proposal on nuclear artillery.

Mr. Wilkinson: Now that the NATO alliance has unambiguously extended the hand of friendship to the Warsaw pact and the Soviet Union, which leads it, will my right hon. Friend, in concert with the Foreign Secretary, see whether pressure can now be put on the Soviet Union to withdraw its remaining troops from Poland?

Mr. King: Certainly we wish to see the withdrawal of Soviet forces as soon as possible. My hon. Friend will know that Chancellor Kohl accepted that it will probably be three to four years before those troops can be withdrawn from East Germany. One should not underestimate the sheer logistical problems of withdrawal


of the numbers involved, but we want it to happen as soon as possible. We should welcome the real progress that has been made.

Mr. John D. Taylor: Were the decisions taken at the NATO summit consistent with the decision taken yesterday in Moscow? If so, do the Government support the restriction on the size of German forces following a united Germany?

Mr. King: Not only were they consistent, but the very tone of the London summit was intended to make clear to the Soviet Union that a united Germany in NATO presented no threat to the Soviet Union. The success of that summit is borne out by yesterday's events, which have given President Gorbachev the confidence to proceed as he has, some might say courageously, to accept against the background of his domestic position the important step forward of a united Germany in NATO. The German proposals for the Bundeswehr and the Volksarmee were well anticipated and we have taken note of them.

Sir Bernard Braine: À propos my right hon. Friend's answer to my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson), does he agree that the real test of Soviet sincerity about the new relationship with the west would be its withdrawal from a country that suffered grievously from both Germans and Russians during the war and that has suffered grievously since? The withdrawal of Soviet troops from Poland would be a great step forward.

Mr. King: I understand my right hon. Friend's feelings and wish to see that withdrawal as soon as possible. We must recognise the most remarkable landmark that emerged yesterday. A few months ago, no one would have thought it possible for the Soviet Union to accept a united Germany in NATO. Three months ago it was almost unthinkable in Moscow and it has now been confirmed. We should welcome that.

Mr. O'Neill: Will the Secretary of State confirm that a statement about the Government's reaction to the NATO summit will be made before the House rises for the summer recess? Will the document "Options for Change" be available for debate, or will it simply be published before the end of the Session?

Mr. King: My right hon. Friend the Prime Minister commented on reaction to the summit in her statement to the House following the G7 summit at Houston. I cannot comment further today on a separate statement about "Options for Change".

Mr. Sayeed: If at the London summit the Government had made an immediate announcement to cut defence spendng by over a quarter, what would have been the effect?

Mr. King: That is a rather subtle question of which I would have liked more notice. The London summit showed the importance of the members of the NATO alliance working together. As I said, one factor that must have been important to President Gorbachev was that he was dealing with a united alliance and knew from talking to Chancellor Kohl that the Chancellor's views were consistent with those of the whole of the NATO alliance.

Conventional Forces in Europe

Mr. Eastham: To ask the Secretary of State for Defence what decisions he has made about the role of the Army following a possible conventional forces in Europe agreement.

Mr. Archie Hamilton: No decisions have yet been taken regarding the future role of the Army, although we are examining the options for change in the light of changing international circumstances.

Mr. Eastham: In view of the dramatic discussions between East and West Germany and the ultimate withdrawal of Russian troops, does the Minister recognise that there is no longer any justification for the retention of 55,000 British troops in Germany? Can he assure us that the Government will not try to introduce some strategy under which those 55,000 troops will be deployed somewhere else in the world, in a continuation of the imperialism that we used to experience 100 years ago?

Mr. Hamilton: "Options for Change" recognises the dramatic alterations in the scene in Europe generally and especially in east-west relations. It will therefore deal with the size of the Rhine Army.

Dame Elaine Kellett-Bowman: Does my hon. Friend accept that whatever agreement may be reached on conventional forces, the Territorial Army must always be maintained as a back-up to the regular forces? Will he congratulate those who serve in the Territorial Army in my area on the opening last Thursday of the Alexandra barracks by Her Royal Highness Princess Alexandra? They will provide magnificent training opportunities for the Territorial Army of the future.

Mr. Hamilton: I am glad to hear what great support is being given to the Territorial Army in my hon. Friend's area. It is an invaluable and essential part of our commitment to reinforce NATO at a time of conflict.

Arms Conversion Agency

Mr. Henderson: To ask the Secretary of State for Defence whether he has received any representations to set up an arms conversion agency.

Mr. Fatchett: To ask the Secretary of State for Defence whether he has received any representations to set up an arms conversion agency.

The Minister of State for Defence Procurement (Mr. Alan Clark): This question appears to have been widely syndicated on the Opposition Benches. It is found in three of the top dozen questions. Let us hope that hon. Members have adequately memorised their supplementaries.
The answer is that I have received various representations.

Mr. Henderson: Has the Minister had the temerity to contact the Department of Trade and Industry on the possibility of an arms conversion agency? If so, can he tell us about the nature of those talks and specifically whether he has received reports from the DTI on how manufacturing industry can obtain its share of the peace dividend?

Mr. Clark: That question has been asked no fewer than seven times, and answered by three Ministers, during the


past six months. The question does not alter and nor does the answer. British industry is responsible for determining its product ranges, not the Government.

Mr. Fatchett: Does not the Minister's answer show clearly that the Government feel that they have no responsibility to the companies and workers which have supplied the British forces over the years? Is not the Minister happily washing his hands of companies such as Vickers in Leeds? Is not it time that the Government accepted some responsibility for those who have supplied Britain so well for so long?

Mr. Clark: I thought that the hon. Gentleman spoke from the Opposition Front Bench on some subject or other, and I had hoped that he would produce some enlightenment on the subject. All that he has done is produce the standard socialist formula—convene a committee of friends, throw some public money at the subject and then claim that something is being done about it. In fact, we have no details about the project. We do not know how it is to be constituted, whether it is to be funded from taxation revenue, or whether—as I understand it—it is to be funded by a surcharge on those in arms production. There are no details: it is simply a down-memory lane formula of socialism.

Mr. Hind: Does my hon. Friend agree that it is essential that we retain a military complex in our industry that is capable of turning out the necessary minimum weapons to guarantee our security? Is not military aviation such as that at British Aerospace at Walton essential to continue the defence of this country?

Mr. Clark: Of course, there are certain key capabilities that we shall retain at all times. We shall always continue to need a strong and vigorous defence sector in our manufacturing industry.

Mr. Viggers: Has my hon. Friend had the opportunity to read some of the articles commemorating Adam Smith? Did they refresh his natural inclination that if market forces do anything, it is crucial that the Government should not become involved in the issue? The very last thing that we should have is an arms conversion agency.

Mr. Clark: I entirely agree with the latter part of my hon. Friend's proposition, but I am not sure whether all Adam Smith's precepts are entirely applicable to the defence industries.

"Options for Change"

Mr. Duffy: To ask the Secretary of State for Defence when he expects to publish the findings of the "Options for Change" inquiry.

Mr. Tom King: I appreciate the keen interest, particularly in the armed services themselves, in the progress of our work which is proceeding against the background of the changing international situation and similar studies among our allies. I advised the House on 18 June of the essential elements in our study of "Options for Change". I am not yet in a position to go further.

Mr. Duffy: Before publishing those findings, will the Secretary of State assure the House that he will have given due weight to a service dividend as well as a peace dividend?

Mr. King: Yes, Sir. I have not used the word "findings" because we hope to come forward with proposals. I hope that there will be an opportunity for wider consultation. Obviously this is an important time for the armed services. We must take account of the interests of the armed services and all those who serve in them as well as those involved in defence generally.

Mr. Nicholas Bennett: What does my right hon. Friend think of the morality of those who want to spend the peace dividend but refuse the investment in nuclear weapons which makes that dividend possible?

Mr. King: I do not know whether my hon. Friend was referring to the Opposition. At this very moment, the Leader of the Opposition is trying to persuade people in Washington that the unilateralist views shared by many Opposition Members do not really exist.

Oral Answers to Questions — PRIME MINISTER

Engagements

Mrs. Margaret Ewing: To ask the Prime Minister if she will list her official engagements for Tuesday 17 July.

The Prime Minister (Mrs. Margaret Thatcher): This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House I shall be having further meetings later today. This evening I hope to have an audience of Her Majesty the Queen.

Mrs. Ewing: Is the Prime Minister aware that when I read the memorandum from the Chequers seminar and saw the words "angst", "aggressiveness", "assertiveness" and "bullying"—[Interruption.]

Mr. Speaker: Order. Will the hon. Lady proceed with her question please? [Interruption.] Order. These pauses take a lot of time.

Mrs. Ewing: —I believed that the Prime Minister was painting a self-portrait. Does she realise that, through her failure to sack the Secretary of State for Trade and Industry and her association with that memorandum and the attack on the German people, she is now tarred with the Ridley brush and is no more fit to lead than he was?

The Prime Minister: No, Mr. Speaker. At one time, I am accused of being isolated and of not consulting anyone; at another time, I am accused of having consultations with those who have something interesting to say. People must make up their minds which they are criticising. The hon. Lady could have read the constructive result in a speech at the Koenigswinter conference some five days later. That constructive speech concerned all our relationships in the Community, particularly with Chancellor Kohl, who shows much more understanding of these matters than does the hon. Lady.

Mr. Wiggin: Given the now general acquiescence about the reunification of Germany, does my right hon. Friend agree that the first act of a newly reunified Germany should be the signing of a full and unqualified peace treaty with the former allies? Will she take steps to ensure that that happens?

The Prime Minister: After unification, I think that Germany and Poland will wish to sign a treaty confirming Poland's existing borders. That will be one of the most


important international measures. I do not think that a unified Germany would wish to have a full peace treaty, for obvious reasons. We might have arrangements that lead to a peace settlement.

Mr. Hattersley: Is the Prime Minister aware that four of the six academic experts who attended her Chequers seminar on Germany have said that Mr. Charles Powell's minute of that meeting gave a slanted—that is, anti-German—account of the discussion? Does the Prime Minister agree?

The Prime Minister: No, Mr. Speaker.

Mr. Hattersley: The whole House, and people in many places and chanceries throughout the world, will be astonished that the Prime Minister has not taken this opportunity to repudiate the more offensive sections of the minute. Four of the experts at the seminar say that the minute was slanted against the Federal German Republic. Everyone in the world now believes that the Prime Minister's private secretary was reflecting not so much the opinions of the experts as the prejudices of the Prime Minister. Why does not she take this opportunity to refute them?

The Prime Minister: I am amazed that the deputy leader of the Labour party chooses his opportunity to question me to use it—[Interruption.]

Mr. Speaker: Order.

The Prime Minister: —chooses to use his opportunity for questioning to attack a civil servant who cannot reply and who has served all Governments with equal integrity. His conclusion on that meeting was highly constructive, as was the meeting itself. There used to be more honour in the House than that.

Mr. Hattersley: The Prime Minister's reputation is far too tarnished for her to maintain this haughty stand any longer. Does not she understand that there is a problem with Anglo-German relations and that that problem is the Prime Minister? What we want—and, I believe, what the majority of people want—is an honest statement of the Prime Minister's opinion. Has she the courage to make such a statement to the House and to face cross-examination?

The Prime Minister: Perhaps the right hon. Gentleman will read the many speeches and consider the many actions in which we have been staunch allies of Germany in NATO and in which the Germans have been staunch allies of ours in NATO and in the EEC. Germany joined us in stationing cruise and Pershing at a critical time. We could not say that the Opposition supported that.

Sir Peter Blaker: Is my right hon. Friend aware that every other Government in the world regularly make assessments of the British character and of Britain's performance, and that they all admire and respect her quality of leadership much more than they respect the inane posturing of the Leader of the Opposition?

The Prime Minister: Had this country followed the policies of the Leader of the Opposition on defence, we should never have seen the remarkable changes that we are seeing now.

Mr. Andrew Smith: To ask the Prime Minister if she will list her official engagements for Tuesday 17 July.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Smith: As the Prime Minister chose in the exchange of resignation letters to refer to
the policies we both believe in so deeply",
does not she owe it to the House and the country—she was the person who mentioned the word "honour"—to say whether she repudiates the view that her former Secretary of State for Trade and Industry expressed in his resignation letter which was that the proposal by the European Commission for economic and monetary union in the Community would be a disaster? Does she repudiate him, or does she agree with him that it would be a disaster?

The Prime Minister: The policies on which the former Secretary of State and I agree are the policies that have transformed Britain from the state in which Labour left it and which it would recreate. The hon. Gentleman cannot have listened to what I said last week—that my right hon. Friend's views were not those of the British Government. I should have thought that the hon. Gentleman would have known that.
On the resignation letter, my right hon. Friend condemned the move to a single currency. Does Labour now support that?

Mr. Paice: Will my right hon. Friend reflect on the policies that she has just mentioned which have brought eight years of successive economic growth, improvements in productivity and record levels of employment? Is not it her determination to pursue those policies which will ensure that the British economy is the best counter-balance to any other economy in Europe?

The Prime Minister: Yes, Sir. Our policies have been very successful. We now have the fastest growth in manufacturing productivity in the G7. In the 1960s and 1970s we had the lowest growth in productivity in the G7. We now have the second largest growth of output in the EEC. In the 1960s and 1970s we had the lowest growth of output in the EEC. We now have the second fastest growth in business investment after Japan. I am delighted to have a chance to say how bad it was in Labour times and how good it is now.

Mr. Carr: To ask the Prime Minister if she will list her official engagements for Tuesday 17 July.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Carr: Given the announcement last Friday that the retail prices index has now reached 9.8 per cent., the continuing balance of payments deficit running at over £1 billion a month and the continuation of interest rates at 15 per cent., causing record numbers of bankruptcies, does the Prime Minister agree that the economy is in a mess and that the responsibility for it lies squarely with her and her Government?

The Prime Minister: I am amazed that the hon. Gentleman calls it a mess. We have the highest-ever standard of living, more people in work than ever and the highest standard of investment. In fact, 28 of the 50 top performing European companies are British.

Mrs. Currie: May I say to my right hon. Friend the Prime Minister—[Interruption.]—

Mr. Speaker: Order. This is the first opportunity that the hon. Lady has had to put a question and I ask her to do it.

Mrs. Currie: May I say that my right hon. Friend the Prime Minister is looking jolly nice today? Does she agree that is is a time of great celebration? As she has observed, it is the end of the cold war. Does she also agree that while we celebrate we should not be complacent about the peace?

The Prime Minister: I thank my hon. Friend and return her compliment. I said in November 1988 that we had reached the end of the cold war provided that Mr. Gorbachev went on as he has done. That was when I first said it, but others have come rather later.

Mr. Ted Garrett: To ask the Prime Minister if she will list her official engagements for Tuesday 17 July.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Garrett: Does the hon. Lady recognise that there are not only splits in her party, but different views in ours? Does she also recognise that they are legitimate differences? Stripped of the hysteria and counter-charges of the past few days, we have to think as a nation about the balance of power, especially in a free, open and democratic Europe. My generation—there are many hon. Members of my generation—should consider the part we played to return the balance of power. Our parents and grandparents did the same. The last three centuries have taught us lessons. Those who did not experience the

1939–45 war or the post-war period should read the history of Europe over the past three centuries. Some of the pro-Europeans should also re-read their history.

The Prime Minister: I thank the hon. Gentleman for those words which I think he has truly spoken. I point out that I said—

Mr. Skinner: He should have been at the seminar. [Interruption.]

Mr. Speaker: Order. I am anxious to call as many hon. Members as possible.

The Prime Minister: May I point out—because I think that the hon. Gentleman will agree—that when I said in November 1988,
The cold war is already at an end",
I went on with the words that were very much in keeping with his sentiments:
Now, that does not mean to say a strong defence is at an end—far from it.
I think that the hon. Gentleman would firmly agree with that: we always have to keep up a strong defence to safeguard peace.
I note what the hon. Gentleman said about learning from history. I was interested to see what Chancellor Kohl said at a press conference today. He said that he understood the concern—especially on the part of the British—whose entire national existence had been at stake in the fight against Hitler. He went on to say that he had not taken my right hon. Friend's comments amiss
The man has been punished enough.
I think that the hon. Gentleman, Chancellor Kohl and I would very much agree on the wisdom of learning from history.

Prescribed Drugs (Compensation)

Sir Michael McNair-Wilson: I beg to move,
That leave be given to bring in a Bill to provide statutory rights to compensation to sufferers from serious side effects from prescribed drugs; and for connected purposes.
Alongside, and complementary to, the great advances in medical science—[Interruption.]

Mr. Speaker: Order. Would those hon. Members who do not propose to remain in the Chamber please leave quietly?

Sir Michael McNair-Wilson: Alongside, and complementary to, the great advances in medical science and surgery that have taken place in the past 50 years has been the introduction of new drugs which, in their efficiency and effectiveness, have helped to banish so many of the illnesses that were common when I was a boy. Diphtheria, measles, scarlet fever and even tuberculosis, which were once the scourges of our nation's health, are now of little consequence. I name those diseases; I could easily name a dozen others that have ceased to be serious and epidemic illnesses—[Interruption.]

Mr. Tony Banks: On a point of order, Mr. Speaker. I apologise to the hon. Member for Newbury (Sir M. McNair-Wilson), but I cannot hear a word that he is saying. This motion is very important.

Mr. Speaker: I quite agree that it is important. I have already appealed to hon. Members to leave quietly, and I appeal to those hon. Members remaining in the Chamber to listen to what the hon. Gentleman has to say.

Sir Michael McNair-Wilson: As it notches up its successes, the pharmaceutical industry has moved on to tackle new challenges and, as I speak, the Committee on Safety of Medicines—the watchdog body that decides when a drug has progressed sufficiently through its clinical trials to be licensed—is considering between 10 and 20 new drugs for which the manufacturers are seeking a licence. A licence is sometimes thought to mean that all the known side effects of the drug have been established. That is not so. As Professor Bill Asscher, the chairman of the Committee on Safety of Medicines, said recently in a "World at One" news programme:
The policy has always been to advise Ministers to license drugs early so that the Committee can study them after they are being used, by proper post-marketing surveillance.
He pointed out that a licence means that, in clinical trials, a drug has been found to be effective, safe and of quality. But he added:
You don't know until you've used a drug in a very large number of people precisely what problems there might be.
Professor Asscher then explained that his committee relied on a voluntary reporting scheme whereby GPs fill in yellow cards commenting on any unexpected side effects that they notice when using a new drug. The monitoring scheme produced 20,000 reports last year, and is continually being assessed by the committee. The scheme depends on the diligence of the GPs, and makes one realise that the fact that a drug has been licensed in no way guarantees that it will not create harmful side effects. If it does, what recourse to compensation is open to the victim? In theory, the Consumer Protection (Registration of Professional Chemists) Act 1988 could be called in aid, as it imposes a liability on manufacturers of defective products without the need to prove negligence. However,

I am told that the cost of a complex drug claim would be prohibitive for a family not on legal aid. That must be wrong.
A drug is a product. An analogy could be drawn between a new drug and a new car: both will have been rigorously tested by their manufacturers before going on sale. In the case of the new car, it will have been driven for thousands of miles before appearing in the showroom. However, if, after it is available to the public, it begins to show unsuspected faults, the manufacturer will recall the model and have the defects put right.
At that point my analogy breaks down. It is possible to recall a car and put it right, but what about someone who has been severely damaged by the side effects of a drug? I mean lasting damage, not just a massive skin-peeling rash like the one that I developed after being given a particular medicine in hospital but of which there is now no trace. I am referring to serious, drug-induced side effects. Thalidomide is the classic example, but it is not an isolated case; other examples are Opren the arthritis drug, Myodil, the heart drug Pexid and the steroid Prednisolone. People who were given high dosages of steroids in the 1960s now have bodies cruelly deformed by their side effects. They will carry those abnormalities to the grave.
The latest addition to the list of drugs giving serious cause for worry is another heart drug called Corwin. It was licensed in May 1988; by 1989, the monitoring system used by the Committee on Safety of Medicines had shown that the drug could cause deterioration in patients with severe heart failure. Other information from the yellow-card "adverse drug reaction" monitoring scheme indicated that it was sometimes being used inappropriately in such patients. In January this year, the Committee on Safety of Medicines made recommendations severely restricting the use of Corwin. It is continuing to monitor the situation.
The exact number of people suffering from severe drug-induced side effects is not easy to establish. Professor Asscher is reported to have stated that 7 per cent. of all admissions to hospital are due to the serious side effects of modern medicines. By anyone's standards, it is a matter for concern. Yet our pharmaceutical industry seems indifferent to the question of compensation, refusing to admit liability and effectively challenging the victims to sue if they can afford it—of course most of them cannot. Just occasionally, one of the drug companies seems willing to accept its responsibility: in the 1970s, ICI set up a £10 million voluntary compensation scheme for victims of its heart drug Eraldin.
Then there is Danny Heffernan, now 23 years old and only 4 ft 4 in tall. He discovered that his stunted growth was caused by very high dosages of steroids. After an 11-year battle he persuaded Glaxo, the makers of the drug that had affected him, to offer an out-of-court settlement.
I do not believe that the present situation is good enough, especially as we now know that licensing by the Committee on Safety of Medicines in no way certifies that a drug is free of side effects. To that extent, I believe that Parliament should insist that our pharmaceutical companies set up a compensation fund. I suggest that they should be required by law to do so.
I believe that we should use the West German example for the sort of law that I have in mind. The West German drug law of 1976 has a section that reads:
If as a result of the administration of a drug intended for human use which was distributed to the consumer within the purview of the law … a person is killed or the body or the


health of a person is considerably injured the pharmaceutical entrepreneur who placed the drug on the market within the purview of this law shall be obliged to compensate for the harm caused to the injured party.
The Germans have that law. The Swedes and the Finns have comprehensive pharmaceutical injury insurance schemes, designed to compensate for injuries caused by drugs. Drug importers and manufacturers share the cost of funding the scheme. I can see no reason why we should not follow those examples. I hope that the House will give me leave to bring in my Bill.

Question put and agreed to.

Bill ordered to be brought in by Sir Michael McNair-Wilson, Mr. Jack Ashley, Mr. Spencer Batiste, Mr. Churchill, Mr. James Kilfedder, Mr. Austin Mitchell, Mr. Michael Morris and Mr. Nigel Spearing.

PRESCRIBED DRUGS (COMPENSATION)

Sir Michael McNair-Wilson accordingly presented a Bill to provide statutory rights to compensation to sufferers from serious side effects from prescribed drugs; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Friday 20 July and to be printed. [Bill 187.]

BILL PRESENTED

DECLARATION OF WAR AND COMMITMENT OF TROOPS ABROAD (CONSTITUTIONAL ARRANGEMENTS)

Mr. Harry Cohen, supported by Mr. Tony Banks, Mr. Andrew Bennett, Mr. Jeremy Corbyn, Mr. Ron Leighton, Mr. Ken Livingstone, Mrs. Alice Mahon, Mr. Chris Mullin, Mr. Peter L. Pike, Ms. Dawn Primarolo and Ms. Clare Short, presented a Bill to ensure that war cannot be declared or troops committed or kept abroad by Her Majesty's Government without the approval of the House of Commons: And the same was read the First time; and ordered to be read a Second time on Friday 20 July and to be printed. [Bill 186.]

Points of Order

Mr. Harry Ewing: On a point of order, Mr. Speaker. In recent times, some hon. Members have raised points of order about those being called at Prime Minister's Question Time, and we have rightly been told that we did not have questions on the Order Paper. I have noticed in recent weeks that hon. Members, particularly Conservative Members, who have been called at Prime Minister's Question Time did not have questions on the Order Paper. Today, two of the three hon. Members whom you called from the Conservative Benches—I am not questioning your selection—simply did not have questions on the Order Paper. I am beginning to wonder what the trouble is in going into the Table Office to table questions to the Prime Minister and to try to catch your eye—

Mr. Speaker: Order. I find it difficult to understand what the hon. Member means. Surely he is not suggesting that I should not go across the Chamber to get a proper balance, because that is exactly what I did today. I am anxious to ensure that those who have nil scores and who had not put a question to the Prime Minister were able to do so. Today I did just that. All hon. Members who were called at Prime Minister's Question Time had a nil score, and that was their first opportunity to ask a question.

Mr. Ewing: Further to that point of order, Mr. Speaker. That is precisely the dilemma. When hon. Members have previously raised this point of order, we have been told by you that we had not tabled questions to the Prime Minister. I would certainly object if you did not preserve a balance between both sides of the House. However, has your advice on previous days now been changed, and do we no longer require to table questions to the Prime Minister in order to catch your eye? Until recent weeks, my understanding has been that we should have questions down to the Prime Minister to try to catch your eye.

Mr. Speaker: I do not know from where the hon. Gentleman got that idea. I hope that the whole House will agree that I should seek to strike a fair balance. The hon. Member for Oxford, East (Mr. Smith) has, during this Session, put three questions to the Prime Minister, and he asked question No. 2 today. For supplementaries, I seek to give an opportunity to those who have not put a question, and that is exactly what I have done today. I hope that that is of some comfort to the hon. Member.

Mr Tony Banks: Further to that point of order, Mr. Speaker. Hon. Members understand that, unlike the Pope, you are infallible in the Chamber. However, you have just said that you call hon. Members who have a nil score. The whole House knows that you keep an accurate record, but from when was the nil score dated? That is an important point. If we are to have nil scores, what about a penalty shoot-out?

Mr. Speaker: The House would do best to leave these difficult decisions to the Chair—[Interruption.] I am not prepared to have my arm jogged by hon. Members who seek to ask questions. However, if an hon. Member has a legitimate constituency interest in a departmental question, that is a different matter. I cannot accept bids for Prime Minister's Question Time.

Mr. Jeremy Corbyn: rose—

Mr. Andrew Faulds: rose—

Mr. Speaker: No, let me deal with this first. The hon. Gentleman who raised the point of order has already had an opportunity to put a question to the Prime Minister. I do not exactly know when—

Mr. Tony Banks: Exactly.

Mr. Speaker: Well, it does not state the date on my list. The hon. Member for Falkirk, East (Mr. Ewing) has also put a question to the Prime Minister.

Mr. Faulds: As a nil scorer, Sir, may I await your future pleasure?

Mr. Corbyn: rose—

Mr. Speaker: Order. The answer to the hon. Member for Warley, East (Mr. Faulds) is yes!

Mr. Richard Tracey: Further to that point of order, Mr. Speaker. I have every respect for the views of Back Benchers, as I am one myself, but while in no way wishing to question your judgment, perhaps you will bear in mind that it often appears to Conservative Members that too many opportunities are given to the Opposition Front Bench, and especially to the Leader of the Opposition, to ask two or three questions, at rather great length.

Mr. Speaker: That is perennial. Some Leaders of the Opposition have not risen as many as three times, but that has become a practice in recent years. The more times that Front-Bench spokesmen rise, the less time there is for Back Benchers. That should be borne in mind.

Mr. Corbyn: On a point of order, Mr. Speaker.

Mr. Dennis Skinner: rose—

Mr. Speaker: No, just a minute. I understand that the Opposition Treasury team is anxious to proceed with the Finance Bill.

Mr. Skinner: rose—

Mr. Speaker: I shall take the hon. Gentleman.

Mr. Skinner: I think that you have a point about the Opposition Front Bench and you must take that into account, Mr. Speaker, but you said that if an hon. Member raised a constituency matter, he or she would be in with a fair chance. I reckon that, on that basis, if any hon. Member mentions the National Union of Mineworkers, and I am the only sponsored NUM Member standing, I must have a chance. That is roughly what you are saying.
May I have an assurance that the deputy Prime Minister registers only half a score, which means that an hon. Member would get another chance if the right hon. and learned Gentleman answered for the Prime Minister?

Mr. Speaker: Of all hon. Members, the hon. Member for Bolsover (Mr. Skinner) is certainly not deprived in any way—[HON. MEMBERS: "Hear, hear."]—and the reason why he is regularly called—[interruption.]—I must say this in defence of the hon. Gentleman—is that he is always here.

Orders of the Day — Finance Bill

As amended (in the Committee and in Standing Committee), further considered.

New clause 2

CAPITAL ALLOWANCE: MANUFACTURING INCENTIVES

'1. This section shall have effect only in relation to trading companies whose activities consist wholly or mainly—

(a)in the subjection of goods to a process so as to produce finished or partly finished manufactured goods for sale on a retail or wholesale basis and
(b) of activities falling within such classes, groups or activities set out in the Standard Industrial Classification issued by the Central Statistical Office as may be prescribed by way of regulations made under this subsection.

2. This section shall have effect only in relation to accounting periods which end after 31st July 1990 and begin before 1st August 1991.

3. Where this section applies, subsection 24(2)(a)(i) of the Capital Allowances Act 1990 shall have effect as if for 25 per cent. in that subsection there were substituted the percentage specified in subsection (4) below, and subsection 3(2) of that Act shall have effect as if for one twenty-fifth in that subsection there were substituted the percentage specified in subsection (5) below.

4. The percentage specified in this subsection is
Ax25+Bx40/A+B
where A represents the total number of days in the accounting period which either fall before 1st August 1990 or fall after 31st July 1991, and B represents the number of days in the accounting period which fall within the period starting on 1st August 1990 and ending on 31st July 1990.

5. The percentage specified in this subsection is
Ax4+Bx10/A+B
where A and B have the meanings assigned to them in subsection (4) above.'.—[Mrs. Beckett.]

Brought up, and read the First time.

Mrs. Margaret Beckett: I beg to move, That the clause be read a Second time.
On Sunday in a television interview, the Foreign Secretary, when discussing some matters of some difficulty and delicacy, was drawn almost in passing into observations on the differences between the economies of our European partners and our own. He referred especially to the German economy, saying that it has, indeed, become more successful than our own by
doing the things and taking the steps we failed to do.
We know—this has become more apparent in recent days—that we have a divided Government. Perhaps among all the different causes for dissent, the greatest rift is opening up between those who, like the Foreign Secretary and occasionally the Lord President, not only recognise but admit the difficulties of our economy, and those who, like the Treasury Front-Bench team, still assert, in the teeth of all the evidence, that we have had an economic miracle and that our present problems, which even those right hon. and hon. Members cannot completely ignore, are temporary and will be short lived.
I recognise that it is a bit of a cheek for the Lord President to take the high-minded tone as he was presiding over our economy when much of the damage was done, but we must at least give the right hon. and learned Gentleman some credit for admitting his error now.
In contrast, today's Treasury Ministers still seem determined—no doubt, for short-term political gain—to undermine their own and their country's long-term interests by encouraging misplaced optimism. It undermines their own interests because the more they seek to convince people that the difficulties are temporary, the less likely people are to pay attention to their exhortations to cease borrowing and to save. That would all be less important, although worrying, but for the fact that the Government's refusal to acknowledge that there is a problem leads to their rejection of any remedy. That is why we await with considerable interest the reaction to our new clause. It is, indeed, a modest step and should commend itself to any Government, with the slight exception of a printing error in subsection (4) which reads "1990" instead of "1991". I am sure that that will not deflect the Chief Secretary from giving it serious consideration.
The new clause is a modest step. It would alleviate a little the burden of high interest rates on businesses and the additional pressure on them to reduce manufacturing investment. That is just the type of step for which industry is calling. The new clause aims to give temporary additional financial help to companies by accelerating somewhat the capital allowances that they would otherwise have received after 1991 and bringing them forward into 1990 and 1991. It also aims to increase the rate of writing down allowances to 40 per cent., rather than 25 per cent., and 10 per cent. rather than 6 per cent.
As I have said, the new clause is a minor and modest measure. While it does not commit the Treasury to the additional relief in the long term, to which Treasury Ministers have been so resistant, it accelerates the relief that would have been given anyway in later years and gives that relief at a time when the state of the economy is causing particular difficulty and when manufacturing industry and investment is so hard pressed.
One of the most damaging myths of the Thatcher years, promoted so heavily by the former Chancellor, the right hon. Member for Blaby (Mr. Lawson), is that manufacturing is no longer of critical importance to our prosperity. That statement from the former Chancellor of the Exchequer revealed a great deal about his attitude. The reason why he advanced a proposition so ludicrous to most Opposition Members was not even that he believed it himself but that he had to find something to explain away the problems that began to be evident in the mid-1980s following the devastation of our manufacturing industry presided over by the now Lord President. The Chancellor needed to show that the devastation, to which even he had to admit, did not matter too much, so he came up with the idea that it was because manufacturing did not matter so much any more. He argued that the improvements in earnings from internationally tradable services—the so-called invisibles—more than made up for any deficiencies in manufacturing earnings which were apparent even then.
Unfortunately, time has overtaken that argument because invisible earnings themselves are becoming invisible and that excuse is no longer credible even to Ministers who are used to believing or putting forward 10 incredible things a day, particularly at the behest of the

chairman of the Conservative party. Now, instead of trying to explain what is happening in terms of the overall record on manufactured trade and the statistics that summarise our position, the Government have taken to talking loudly, rather fast and somewhat aggressively about particular aspects of policy which they claim, if they are particularly selective about their statistics, show some degree of success. Of late, the Chief Secretary has talked about output, productivity levels, exports and so on.
The Opposition certainly welcome any signs of improvement in the vitally important manufacturing trade on which Britain depends for its prosperity, but the selected figures that the Government use are usually, if not always, completely unrepresentative. In fact, they represent a period of recovery from catastrophe rather than a record of success. It is rare indeed for Ministers to dare to examine the entire record of their period of stewardship.
We gain the clearest picture of where the country stands as against our competitors by considering just two of the many confusing different sets of statistics that tend to be put before us in such debates. Those two sets of statistics encapsulate the picture. One set represents the results of our overall performance, never mind the bit on output, productivity or exports. The overall results of our performance in manufacturing is perfectly summarised by our balance of payments deficit. The second set of statistics, which provide the underlying contributory factor behind that balance of payments deficit, are those concerning the levels of investment in manufacturing industry.
Let us first consider the statistics preferred by the Government. I will put them in context to help the Chief Secretary with the argument that he will no doubt advance. The most favourable statistics that the Government can put before us relate to the increase in manufacturing productivity. Some of my hon. Friends argue—I concede that the argument has some force—that if one throws hundreds of thousands of people on to the dole there is bound to be some improvement in productivity. Apart from that, however, we recognise that some improvements in productivity have occurred and we welcome them, even if the pace of such improvements is now, unfortunately, slowing down.
The Opposition argue, with more force, that if investment per capita had been higher in earlier years, productivity improvements might not only have come earlier but have been more soundly based and thus not have needed the impetus of large-scale unemployment. Those are the caveats that one must enter against the best figures that the Government can produce.
We often hear in the House and elsewhere about the increase in manufacturing output. Not so long ago, the Chief Secretary made a speech about the improvements that he has recently witnessed in manufacturing output. He said that in the past three years that output has risen faster than the gross domestic product as a whole. That is fine, but he also went on to say that that
indicated a marked turn-around compared with the historic performance of manufacturing industry
That statement suggests to us that whoever else should he consulted about the history syllabus, it should not be the Chief Secretary. The historical record of manufacturing output as a percentage of GDP shows that, from 1948, there was a general gradual rising trend, followed by an unprecedented nose-dive between 1979 and 1981, since


when it has been more or less static. There has been a slight improvement on the more or less static record that preceded the latter part of the Government's record, but there is no doubt that output is nowhere near the levels reached between 1948 and the late 1970s. It is rather strange to define the last few years as "historic". The scale of the nose-dive that occurred in the early 1980s is equivalent to between 3 and 4 per cent. of GDP. That is the order of magnitude of our balance of payments deficit and that decline in output is directly linked with it.
We are delighted to note the recent growth in manufacturing exports. It is more than welcome, but there is a long way to go before we can overcome the volume of manufacturing imports, which, between 1979 and 1989, has risen to more than double the rate of manufacturing exports during the same period—the period since the Government came to power. Such are the factors which have contributed to the accumulation of our massive balance of payments deficit that summarises the overall effect of our manufacturing performance.
If we want to take a historic moment from the years of the Government's stewardship it is 1983 when, for the first time since the industrial revolution, manufacturing trade in this country went into deficit—it has continued to decline ever since. Even the appearance of such a deficit is alarming enough for a country that still earns its living, and must continue to do so, by manufactures. The size and scale of the deficit—some £16 billion last year on manufacturing goods alone—is the most alarming feature of all. Equally alarming is our failure to take the steps most likely, even in the very long term, to redress that balance.
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That leads on to the question of investment. Just as manufacturing is the source of our wealth and the engine of growth, so investment is the engine of manufacturing. Our record on investment is worse than appalling—it is frightening. Apart from productivity, the Government's other boast in terms of recovery is of the recovery in company profitability. That is good and my hon. Friends and I are pleased to see company profitability improve, but where did that profitability go? If it went into increased investment at all, it went into increased investment overseas—investment by acquisition rather than investment for growth of the kind being carried out by our competitors. That is the main reason why Britain, in too much of its manufacturing, has lost its competitive edge.
That has not happened everywhere. There are companies in Britain that are world leaders in their fields, and we applaud them. We are delighted to have them and we are grateful for their performance, but it is no coincidence that those companies, the leaders in their fields, are the firms which invest. It is no coincidence that they put money into research and development and into training, and that they plan long term instead of considering investment, as some of the Prime Minister's favourite industrialists do, only if it results in profits in two or three years' time. Nor is it any coincidence, most of all, that those companies plan to expand and grow and not simply to stand still.
The Chief Secretary may be familiar with a study carried out by Warwick university and quoted in the MBA review in June 1989. It suggested that four out of five United Kingdom companies considered that their sales

objective should be to defend the status quo and their existing market share. In Japan, four out of five companies considered that their sales objective should be to grow, to overtake and to take the market shares of their competitors.
The Chief Secretary may have had a chance to study papers presented at a recent conference sponsored by the Department of Trade and Industry on innovation in industry and on the needs of high technology. Apart from the many papers that commented in depth on the fact, for example, that we were the only country to cut spending on civil research and development in recent years when our competitors were increasing their spending on those items, a senior industrialist pointed out that some of the most famous Japanese companies took 20 years of planning, investment and expansion to become world leaders in their fields, to take over from previous world leaders—frequently American companies—and that they succeeded, at least in part, because they set themselves the goal rather than to stand still.
The Opposition believe that Britain and British manufacturing industry need most of all to foster a culture of sound management devoted to investment and growth. We greatly regret that that culture has been undermined by the decade of Conservative rule, which instead has fostered admiration of tycoons and asset-strippers and has rather sneered at people who look for long-term prosperity rather than making a fast buck.
The consequences of the lack of that general culture are most evident when we consider our record on investment. Manufacturing investment as a proportion of gross domestic product fell sharply in the recession period 1979 to 1981. Indeed, as a level of expenditure in constant prices, only in the last couple of years has it recovered to just above the 1979 level. But when one examines the position not in terms of constant prices, but as a percentage of GDP—the percentage of wealth available and the indication of the commitment of our country to investment in our future—one sees that it has still not returned to the lowest level achieved between 1974 and 1979.
The Government prefer to talk about business investment, which includes investment in such things as car parks and casinos, rather than about manufacturing investment, but even as a percentage of business investment, manufacturing investment has fallen in recent years by as much as 7 per cent.
I said earlier that many of us would argue that productivity might have improved more soundly and earlier if investment per capita had been at higher levels. Investment per person employed in the manufacturing sector has been so disastrous that among the 18 countries of the Organisation for Economic Co-operation and Development we come 14th, above only one or two immediate neighbours such as Greece and Portugal.
Equally disturbing are the developments in industry, such as the increased number of bankruptcies. I am sure that the Chief Secretary has received the recent Dun and Bradstreet report showing that more than 11,600 firms went bankrupt in the early part of this year and that the pace of failure was quickening. Against that background, the forecast from the Government and others is that our levels of investment are declining while those of our competitors are increasing all the time. That forecast is true both of the Government's favoured business investment and of manufacturing investment. The most


recent Confederation of British Industry forecast shows that investment intentions are at their lowest level since 1982, with the balance of future investment intentions at minus 8 per cent.—and the Government's reply to those problems is nothing, absolutely zilch. It has been stated that when the Department of Trade and Industry—for once taking an interest in industry which the then Secretary of State for Trade and Industry did not find out about in time—asked McKinsey and Co. to examine our electronics industry, its report cast doubt not just on the industry's prosperity, but on whether it could survive at all. Yet despite that worrying report on a key sector of industry, the Government did absolutely nothing.
In the 11 years for which the Government have held office, our ability to supply our own need for manufactured goods has steadily declined, and with it the underlying strength of our economy. That has been reflected in our historically catastrophic balance of payments deficit. That is the road to ruin, paved not with good intentions, but with weak excuses.
The Opposition believe, as does most of British industry, that we must take steps of the kind set out in a minor and modest way in the new clause if Britain is not to be left even further behind as our competitors plan, invest and grow to meet the challenges of the single market. More than that, we need a vision for the future—a different culture for manufacturing industry.
The Opposition's vision for manufacturing industry is not a plan to increase company earnings per share by fiddling the accounting rules or having more takeovers. It is not a scheme to push up the nominal returns by delaying much-needed investment or squeezing up profits by cutting back on training. The Opposition's vision is of a British industry which extends its knowledge through research, and expands its capability through training and its output through investment.
That is the reason for the new clause which, if carried, would represent a minor contribution towards helping British industry to continue to invest despite the problems heaped on it by the Government's failures. If the Government are not prepared even to consider such a helpful but minor step, for which the Government and the Chief Secretary know that industry and the Opposition are calling, it will be a clear signal to British industry, to the country and, most of all, to our competitors, that Britain has given up the race for 1992.

The Chief Secretary to the Treasury (Mr. Norman Lamont): I want to respond briefly to the remarks of the hon. Member for Derby, South (Mrs. Beckett); I shall then listen to other contributions and, if I catch the Chair's eye, I may be allowed to respond to them later.
The new clause is about a short-term acceleration in the rate of tax depreciation for investment in equipment and building by manufacturers and other industries, but the hon. Lady turned the debate into a rather more general discussion of the economy. Many of the issues that she raised have been debated many times before—for instance, at Question Time.
First, the hon. Lady alleged that there had been no improvement in recent years in the British economy. We, of course, refer to the marked step-change in growth. The hon. Lady chose to concentrate all the time on manufacturing—for her, it was the only measure of

economic performance. Of course manufacturing is an extremely important part of our economy, but it is wrong to suggest that it is the only measure of economic success.
When assessing overall economic policy, the real measure should be a combination of growth and inflation performance over the decade. Judged by those two criteria, the performance of our economy in the past decade compares well with that of our competitors and better than it did before. That is certainly true of growth. We are going through a lower period of growth now, but even taking account of this year's lower growth rate we shall have grown faster over the past decade than the EEC average, and we certainly compare much better with our competitors in growth terms than we did in the previous decade. So growth is the most appropriate measure to employ.
The hon. Member for Derby, South sought to dismiss the growth in manufacturing productivity as merely the result of de-manning. Of course there was a considerable shake out in the early 1980s, but that just shows how uncompetitive British industry was. There was a strong concealed unemployment element in British industry, and most business men and manufacturers admit that the problems faced up to in the early 1980s had to be faced up to; and that has helped make British industry more competitive and profitable.
I was pleased to hear the hon. Lady acknowledge for once that there has been a considerable increase in the profitability of British manufacturing and business—it is extremely important. Where on earth is investment to come from? It must come from profitability. There are all sorts of arguments in which statistics are bandied about, but it is an indisputable fact that the profitability of British business is, thank goodness, higher than it has been for several decades. That is extremely encouraging.

Mr. A. J. Beith: I have been following the right hon. Gentleman's argument closely. He said that we should use two measures of economic performance: growth and inflation. He went on to talk about growth but somehow omitted to talk about inflation, which is not only much higher than that of any of our key competitors but scoops up much more in corporation tax and therefore places a greater burden on industry.

Mr. Lamont: The Government repeatedly make it clear that we regard our inflation as unsatisfactory and unacceptably high. I did not make the usual speech about performance under the last Labour Government because we are always accused of delving too much into the past and of exploiting it. It is, understandably, something which Opposition Members prefer to forget. The inflation record of this Government is incomparably better than that of the Labour Government, but even that is not so relevant as the fact that the policies that the Opposition advance are likely to bring a return to high inflation, especially because of their attitudes to public spending.
The hon. Lady also spoke about investment. She did not say explicitly but presumably believes that the corporation tax reforms that were introduced by my right hon. Friend the Member for Blaby (Mr. Lawson) when he was Chancellor of the Exchequer are inadequate for encouraging investment. When Labour was in power corporation tax was 52 per cent. We have reduced it to 35 per cent. and have got rid of the allowances.
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Is that a good bargain? Is it better for business to have higher profits, a better rate of return and permission to keep more of its profits, or is it better to have a much higher rate of corporation tax which subsidises and provides an incentive by way of allowances to investment? I do not think that there is any evidence that the new system has damaged investment because since it was introduced we have seen strong investment growth.
In the past three years business investment has grown by 40 per cent. Non-residential investment is a higher proportion of our GDP than of the GDP in any other country except Japan. The hon. Lady says that we should talk only about manufacturing investment. I reject that argument, just as I reject the argument that we should talk only about manufacturing when discussing the economy as a whole. We must look at investment in all sectors.
It was amusing to hear the hon. Member for Derby, South say that business investment included car parks and all sorts of "frivolous" investment. It includes important investment in the retail sector and in tourist facilities, some of which employ many people. It is not correct to say that the only investment that matters is in manufacturing. As the hon. Lady said, manufacturing is important, but it is by no means the whole story.
Since the new tax regime was introduced, there has been strong growth in investment. Britain has been enjoying an investment boom. One of the reasons for problems about inflation and on the current account is that the enormous boom in investment has exceeded domestic savings. The suggestion that the new structure introduced by my right hon. Friend the Member for Blaby when he reformed the corporation tax system has damaged investment is not borne out by the facts. If it had damaged investment, we would not have an extraordinary and continuing good record on inward investment. We get a larger proportion of American and Japanese investment than any other country in the European Community. Foreign companies come here for many reasons, and among them is the tax regime. They like the fact that we have one of the lowest corporation tax rates of any country.
When the new tax regime was introduced, Labour strongly opposed it, but I still do not know the Opposition's precise attitude. Of course, Labour has opposed many things in the past. The Opposition seem to jettison everything right, left and centre and nobody quite knows what they stand for. We certainly do not know their stance on capital allowances. I hope that when the hon. Lady speaks again she will make it clear whether she wishes to see a system with capital allowances that subsidises investment through the tax system. Such a system is not necessary to encourage investment. It is not especially desirable, nor does it encourage the best sort of investment.
Opposition Members scoff and laugh at the phrase "quality of investment". When we say that the quality of investment is better today, we simply mean that the rate of return earned on investment is higher than ever before. We want a tax system that does not subsidise people to invest purely in quantitative terms. We want a system that encourages people to retain their earnings and ensures investment in the most profitable areas.
The hon. Lady is right to say that investment is what matters for the longer term, but it must be investment in

the right projects and in those that earn the best rate of return. That will do most to underpin the long-term performance of the economy.
The hon. Lady referred to a speech of mine about manufacturing, and I think that it was probably the one that I made to the French Chamber of Commerce. Speaking from recollection, I think that I said that foreign investment in Britain was contributing to the manufacturing base. I evidenced the motor industry which, when the Labour party was in office, had suffered from a remarkable increase of more than 50 per cent. in import penetration. Since then, it has stabilised and there has been considerable foreign investment, not just by the highly publicised Japanese firms—one of which is to invest in the hon. Lady's constituency—but by American companies. I do not think that anyone can dispute that the outlook for the British motor industry has improved beyond all recognition—profitability has improved; industrial relations have improved; the market share has stabilised; and there is much higher investment than for many years.
During that speech, I pointed to the fact that some independent commentators had analysed the position and said that a number of independent reports had been published suggesting that there might be a rise in manufacturing as a proportion of gross domestic product. The hon. Lady is right to suggest that that is a marked difference from the trend during the past few decades, under both Conservative and Labour Goverments, during which manufacturing as a proportion of GDP declined. The proportion of GDP represented by manufacturing in Britain is not markedly different from that in France, Italy or the United States. Opposition Members hark back to a world that existed decades ago, and which I do not think will easily return. However, it is interesting that the independent commentators to whom I referred thought that a small change was taking place on the back of some spectacular foreign investment in, for example, the motor industry.
The debate is really about the tax regime that we want for investment. Do we want a low rate of corporation tax—one of the lowest in the world—that encourages people to retain their earnings and look for the most profitable investment? The hon. Lady implied that that was not the Labour party's view. She said that she did not want companies to retain earnings per share simply for the benefit of shareholders. In fact, that is how companies raise capital from the private market to provide the investment that is needed tomorrow.
Although the hon. Lady made a general economic speech, she did not produce one scrap of evidence that the tax regime and the changes to it have in any way harmed investment. On the contrary, there has been a strong growth in investment since the changes were made. I do not think that there is a good case either to make the hon. Lady's proposal a permanent change—which I think is what she wants—or to implement it just for one year, which is what she was advocating. It would be a mistake to change the tax system just for one year to accommodate slower growth in the economy and in investment.

Mr. Roy Hughes: I obtained information from the Library showing that, as a percentage of gross domestic product, British corporation taxes are far higher than those of our principal competitors. I was given the following figures: the United States, 2 per cent.; West Germany, 2 per cent.; France, 2.4


per cent.; and the United Kingdom, 6.2 per cent. The Library staff were amazed. Can the Chief Secretary enlighten me on this point?

Mr. Lamont: I do not know whether I can enlighten the hon. Gentleman, but I can attempt to answer his question. This has been a subject of considerable debate. The comparisons depend on what taxes are included. Some comparisons have included social security payroll taxes in other countries. The comparisons are affected also by the rate of growth of profitability. We have cut the rate of corporation tax, just as we have cut other tax rates, and revenues have soared. The profitability of British industry has risen markedly, resulting in a considerable increase in the rate of tax paid by British companies. For the first reason I gave, I would treat the comparisons with caution. It is not a matter of comparing like with like. Japan, which has highly profitable industry, appears to bear a high company tax burden. That is a reflection of its profitability.
I do not believe that there is a case for mucking about with the tax system on a temporary basis. The evidence so far is that the original corporation tax changes have proved to he effective and have stood the test of time.

Mr. Beith: The Government try to have it both ways. They spend some of the time telling us that the rate of corporation tax has been reduced and that business is better off and some of the time telling us that the Revenue is so buoyant from corporation tax that the community as a whole is better off.

Mr. Lamont: What is the contradiction between rate and yield?

Mr. Beith: It cannot be true that business is better off from paying less tax and that the tax yield is greater. The Chief Secretary knows that the revenue that the Government have obtained from corporation tax has increased sharply because of profitability and inflation. I, for one, welcome lower rates of corporation tax, and I have supported the Government when they have lowered those rates. Business is still paying a great deal of corporation tax, so that is a relevant consideration when we look at the level of investment and the extent to which corporation tax might influence it. Obviously, it is only one of the influences, but it could be significant.
The Government are fond of telling us that investment is booming and that we have remarkable levels of investment. The Red Book is full of relatively flowery phrases about our investment record. The Chief Secretary knows, however, that the quality of investment and where it is taking place are contested. The phrase "business investment" includes an enormous range of sectors—manufacturing, finance, business services, buildings, computers and leisure activities—which are of varying significance in terms of helping our balance of payments and their effect on future profitability.
Many analyses have suggested that key manufacturing groups have not been the subject of an investment boom. The Chief Secretary will know of the arguments put by Gavyn Davies in the paper that he presented to the Treasury and Civil Service Select Committee and the points made on similar lines by John Muellbauer in an article in the Financial Times. The latter said:
The evidence … here suggests that, with few exceptions, investment has grown more in the sectors in the economy

which are more sheltered from international competition and which make a smaller contribution to the balance of payments.
John Muellbauer made the interesting point that one manufacturing sector in which there has been increased investment has included paper, printing and publishing. He said:
The rise in investment there is partly due to national newspapers moving out from Fleet Street, the spread of free newspapers and the demand for printed material from the growth of financial services"—
printing all those privatisation prospectuses and other things that generate so much paper in our society. For that to be about the only major exception to a pattern in which the key areas of manufacturing industry have not attracted major investment is worrying and significant.
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The large increase in investment between 1986 and 1988 was built on the back of an unsustainable credit boom—for which we are now paying the price—and the current levels of inflation date back to that period. Already, the effect of high interest rates seems to be hitting investment and investment intentions have been cut sharply. It is debatable whether the improvements already made will continue.
It can be concluded that the corporation tax structure is worsening the position because of the effect of inflation. Inflation is at a far higher level than that of our competitors, which raises the tax that companies have to pay. Business is paying for the Government's failure to control inflation. Some of the time the Government like to blame business for inflation because they claim that business is being weak in dealing with wage claims; that depends on whether the Government are in a monetarist mood at the time. Business is paying the price for the high level of inflation.
One of the elements that could contribute most to encouraging investment is stability in economic policy and that includes stable exchange rates and stable interest rates. That argues for membership of the exchange rate mechanism, which has been the universal call of business for a long time. It also argues for the mechanisms to ensure stable prices which exist in those countries about which the Government are having such difficulty in their public pronouncements at present. Here we are lecturing Herr Pöhl, saying that he does not know how to handle inflation and that he would not have known how to deal with the kind of unemployment that existed in Jarrow, when Germany has produced a stable price regime out of its independent central banking system.
The stability in Germany is the envy of British business and, in that climate, a great deal of investment is taking place. As the unification of Germany proceeds, German business is especially confident about being able to invest in East Germany because it knows that it would be doing so in the stable economic and political climate of the Federal Republic, with all the assurances that that gives that there will not be sudden and dramatic changes of policy and that there will not be sudden and dramatic changes in the economic management of the country. All that is a result of a German system that brings together a proportional representation election system, and a monetary and financial discipline system. Some members of the Labour party now deride and laugh at that, but it


is the key to much of Germany's post-war success and the investment in which German firms so freely and readily engage.
Those who want to lecture Germany and say that we are doing it far better simply have not got the evidence to do so. Neither the Chief Secretary nor Labour Members who wish to do so—there seem to be fewer of them now—have the evidence to make the claim that we know how to operate the system better.
Along with stability, money is of crucial relevance to investment. That will be determined by the success of the Government's economic management. There is at present a debate—partly stimulated by the Government—about short-termism, which is a phrase that occasionally escapes the lips of Ministers. Industry has accused the City of not taking a sufficiently long-term view of investments and has accused the banks of looking for the second-hand value on which to lend rather than for the potential profitability of the investments that industry seeks to make. Clearly, the Government must give attention to that side of the problem as well as to the tax implications of the new clause if we are to make progress.
Alongside that, there should be key public investment in transport if industry is to take advantage of and be able to operate effectively in the single European market, and if industry in the north of England, Scotland and Wales is to operate once the channel tunnel is open on a competitive basis. That is an area in which countries in mainland Europe—and especially Germany—are willing and keen to invest. However, it is an area in which the British Government seem to think that there is something indecent or improper about serious and significant public investment.
There needs to be investment in education and training to give us the work force who can make use of the high-technology investment in which industry needs to engage. The Government's reluctance in those areas is seen by industry to be a handicap.
If all those policies were pursued, would it help to make changes in the corporation tax structure such as those proposed by the new clause? The Labour party's new clause seeks to increase capital allowances from 25 per cent. to 40 per cent. That would enable a firm to set off more of the capital cost of an investment against corporation tax in any one year.
That is potentially an expensive change and I am surprised that the Government did not refer to the cost—perhaps they are saving that for their reply. We could be talking about cost implications in the order of £1.5 billion. That is why we have previously put forward proposals for increased capital allowances on new investment so that we do not take on the large deadweight costs of increasing the allowance for writing down all the existing investment. That would have a stimulating effect, particularly in the present circumstances, and could be undertaken at less expense than the proposals we are considering.
I am sympathetic to the intentions of Opposition Front-Bench Members, but I wonder whether this proposal has been subject to the rigorous examination of all proposals lest they add to the total cost of the Labour party's programme, which is now under such scrutiny.

Mrs. Beckett: I said that this was a temporary measure. I do not have the papers immediately to hand, but I am sure that if the hon. Gentleman reads the clause with care

and looks at the dates involved he will find that the cost is more likely to be about £130,000 or £150,000 than the sums he mentioned.

Mr. Beith: I am naturally suspicious about the claim that such a measure can be as temporary as the hon. Lady suggests. Perhaps I am doing her a disservice. Such a short-term change in the tax system would not survive. At the end of the period industry would be crying out for an extension and there would be a great deal of pressure. To be fair, if the period were strictly limited, the costs could be contained on that basis.
A more logical distinction is one that attracts to new investment the higher level of depreciation allowance mentioned in the new clause. The Government cannot continue to be so complacent about investment in manufacturing industry. I should have thought that their experience over the past 12 months with the rate of inflation taking off should have taught them that there is no advantage in claiming that things are better than they are. The Government have spent much of the past few years making exaggerated claims about the economy, some of which were extremely damaging to expectations. If people are told that they will be better off and that the standard of living will improve, they will borrow more because they will expect to be earning more money to pay for it when the day of reckoning comes. Constantly repeating a misleading view about the state of the economy does not do any good and does not encourage us to address the key problems faced by the economy. A little more realism on the part of the Government and an admission that there are problems with investment would be welcome. I am glad that the new clause is before us and I am sympathetic to its objectives.

Mr. Robert Sheldon: The speech of the Chief Secretary to the Treasury would have been more impressive if it had not been made against a background of a balance of payments deficit of £15 billion to £20 billion, which, I note, he did not mention.
The Government's true record lies in two factors. First, manufacturing industry turned into deficit for the first time in centuries. Secondly, there was the coincidence of the arrival of North sea oil. Those are the economic factors that will determine the way in which the Government are viewed in the future.
I agree with the Chief Secretary about the need to achieve quality of investment. This is a modest measure. I agree with the counter-cyclical argument which was, after all, used by the previous Chancellor of the Exchequer, the right hon. Member for Blaby (Mr. Lawson). The right hon. Gentleman introduced a counter-cyclical measure, and very valuable it was. If one tells people that there is to be an investment incentive with a cut-off date, and if one chooses the right time in the economic cycle, one can achieve continuing growth for the future based upon it. That, too, is of value.
The most important aspect lies in the forecasts given in the Red Book at the time of the Budget. In the summary of economic prospects, we read that manufacturing output in 1989 grew at a rate of 4.75 per cent. In 1990, growth is forecast at zero. In the first half of 1991, it is forecast at 0.75 per cent. That is a truly miserable record, and there will be little incentive for anyone to invest in the plant and machinery that are so important.
The Chief Secretary is right to say that we need to look at all investment, but when the right hon. Gentleman said that manufacturing was not the only measure of economic success, he was not according to it the importance that it should be accorded. Financial services have been the glamorous part of our investment and our economy. We had hoped to be the banker of the world. We had hoped to make enormous improvements and extensions. But we must remember that a financial economy rests fundamentally on its manufacturing industry. We seem not to recall that important fact. Britain became a financial centre as a result of the industrial development that took place in the last century and the century before that. New York became a financial centre as a result of the development of America's manufacturing industry. Frankfurt is becoming a financial centre as a result of the development of Germany's manufacturing industry and Tokyo has become a financial centre as a result of the development of Japan's manufacturing industry. There is a time lag in all these matters and the time lag is working against us and in favour of Frankfurt and Tokyo. I do not view that process with pleasure because I understand and accept the importance of having a financial centre. But in organising the structure of our investment and in arriving at an appreciation of the importance of that sector, we should not fail to take into account the basis on which it rests; if we fail to do that, we do ourselves a great disservice.
The Chief Secretary noted that productivity had improved as a result of the removal of concealed unemployment in the early 1980s. I am sorry to say that there was not much waste of energy and activity in Ashton-under-Lyne when the $2.40 pound and 17 per cent. interest rates reduced the number of manufacturing companies by one third. I am talking about medium-sized, reasonably high-tech firms—plenty of companies of the kind to be found in Tokyo and in Germany. Those companies suffered as a result of our economic performance in those years and we must restore to them some of the advantages that similar companies in other countries enjoy.
I am concerned that capital allowances hardly meet the cost of depreciation. In my early years as an engineer, I used to operate a jig borer. It was a very expensive piece of machinery. I do not know how much the comparable model—taking into account the development of that branch of engineering—would cost today, but I would guess about £50,000. At the end of 12 months, one would get £12,500 in capital allowances. What is the profit margin on such equipment? I bet that if one tried to sell the jig borer back to the manufacturer, the salesman or the distibutor, one would not get £37,500 for it. That means that there is an investment disincentive because we have not allowed for the true cost of depreciation. We are giving no incentive at all because we are failing to meet the cost of depreciation. The hon. Member for Lewisham, West (Mr. Maples) shakes his head. I do not think that he understands the size of the profit margins in such industries. The salesmen get paid very handsome sums indeed. As a result, the depreciation costs are not met.
The figures produced by the Financial Secretary at the time of the Budget show how little prospect there is for growth—zero growth is forecast this year. As my hon. Friend the Member for Derby, South (Mrs. Beckett) rightly pointed out, this is just the time when we should be doing something to promote investment incentives. As the hon. Member for Berwick-upon-Tweed (Mr. Beith) said,

there are various ways of doing that. I find it sad that the Government do not appear to understand the nature of the problem sufficiently to come up with some sort of solution. They think that there is no problem. That is most worrying. Once we have realised that there is a problem, we can deal with the matter. The Government's failure to do that will take me into the Lobby with my hon. Friends tonight.

Mr. Denzil Davies: My hon. Friend the Member for Derby, South (Mrs. Beckett) said that new clause 2 was a modest proposal. Perhaps it is too modest, but as my hon. Friend and my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) rightly said, it is at least an attempt to give some minor assistance to British manufacturing industry.
The Chief Secretary was extremely euphoric about the economy. Let me remind him that in 1979 the United Kingdom had a balance of trade surplus in manufactured goods. That was in the days of the Labour Government—the days of picking winners, investment grants and 100 per cent. writing-down allowances. But in 1989—the last full year—we had a balance of trade deficit of £16 billion in manufactured goods. Those figures are the best evidence available and they tell their own story. They tell the story of the massive decline in Britain's industrial and manufacturing base during 10 years of Tory Government. The blame for that decline lies at the Government's door and it has been caused by the actions that they have takenmdash;and have failed to take—in respect of manufacturing industry.
Those actions are perhaps too numerous to detail in such a short debate, but I can give one or two examples. My right hon. Friend the Member for Ashton-under-Lyne referred to the years from 1979 to 1982, when the present Leader of the House was Chancellor of the Exchequer. It has been calculated that the right hon. and learned Gentleman managed to obliterate 25 per cent. of Britain's manufacturing industry in those two years.
It is extraordinary to note that when the Tories came to power, mouthing monetarism, in 1979, few of them understood how a monetary system could be operated within the open financial system that we have in Britain. They certainly did not understand the limitations of monetarism. Eventually, the right hon. Member for Blaby (Mr. Lawson) understood its limitations, but it took a long time for the Government to reach that conclusion. Between 1979 and 1982 we had macho overkill monetarism. The body count of factories and industries on the industrial battlefield was horrendous. My right hon. Friend the Member for Ashton-under-Lyne referred to his constituency, but we all have examples from our own constituencies.
While the present Leader of the House was beavering away at the Treasury, Lord Joseph was beavering away at the Department of Trade and Industry dismantling most of the regional incentives, grants and investment allowances that went to the areas where most of Britain's manufacturing industry was located. The Treasury and the Department of Trade and Industry both did their job and, as a result, at least 25 per cent. of our manufacturing base disappeared, never to return.
Let us move on to 1984 and the actions of the right hon. Member for Blaby which are, to a certain extent, the


reason for the present new clause. Before the 1984 Budget, we had 100 per cent. writing-down allowances in respect of plant and machinery. If a manufacturing firm invested in plant and machinery in the first year, it could write off the whole cost. However, that did not suit the Government's plans or their view of the way that the economy should operate. Therefore, the Budget provided for 75 per cent. in the second year; in the third year the figure would be 50 per cent.; and in the fourth year the allowance disappeared completely. Now it is 25 per cent., which goes into the pool. The new clause proposes to increase the figure temporarily to 40 per cent.
The right hon. Member for Blaby would have justified what he did. We heard echoes of that from the Chief Secretary, on the basis that it is better to have a lower rate of corporation tax and to eliminate the tax breaks. That is a Reagan view of taxation. However, because most of the allowances benefited more manufacturing industry, the benefit of lower corporation tax in the main goes to the service sector, the financial sector and the south-east. All those areas are less dependent on plant and machinery. That was the effect of what was done in 1984, and that is why pressure was put on manufacturing industry: because it lost the benefit of the allowances for investing in plant and machinery.
We have been told that the Government do not believe in using the tax system for social engineering, and that we must have a level playing field. They have no inhibitions about using the tax system to encourage the business expansion scheme—all that money went into property; to encourage the personal equity plan schemes—all that money went into the stock exchange; or to encourage private shareholding. However, we apparently cannot use the tax system for the social engineering purpose of trying to benefit our manufacturing industry.
Since the 1970s, the Tory party has shown little understanding, sensitivity or belief in manufacturing industry. Those of us who sat in the House throughout the 1970s saw successive Tory Members with some experience in manufacturing and industry being replaced by the estate agents, the so-called financial analysts, the stockbrokers and insurance brokers and the third-rate merchant bankers. Most of them were from the south-east, where there is no tradition of heavy manufacturing or engineering. There was no belief in manufacturing industry and, apparently, no need to examine it.
If the speeches of 1978–79 are read again, they prove very informative. Hon. Members suggested then that Britain no longer needed a manufacturing industry, but would rely on its overseas investments; that it would become a tax haven fit for such people as the Rolling Stones and Tony Jacklin to come back to. The Leader of the House made such a speech in 1978–79. Britain was to be dependent on invisibles, living off those invisibles. We know what has happened. The Government have an extraordinary record: they have destroyed much of our industrial base, and have managed to eliminate the invisibles as well—to the extent that they are now literally invisible. It is no good the Chief Secretary shaking his head. We know that there has been a revision of the figures, but the invisibles are now minute. We have lost our industrial base and the oil, and we do not even have the

invisibles. That is the measure of the success of the Government's economic stewardship of the country in the past 10 years.
There may be one final act of mayhem—the exchange rate mechanism, the final solution. There is a case for the ERM and for fixed exchange rates—which I happen to believe in—provided, as the Prime Minister rightly said the other day, that in the end the exchanges can be chained by the actions of a sovereign Government. There is a case for linking exchange rates—as much as possible—with those of our trading partners, especially as 60 per cent. of our trading is now done with the EEC. There is also a political case for the ERM: it is better to be a member, and to try to stop the nonsense of economic and monetary union. However, I doubt whether we can do that.
The Government have said that the exchange rate mechanism is the magic formula—the deus ex machina—that will apparently win them a fourth term of office. Their strategy—if it can be called one—is brutally simple. First, we should march the jolly old pound up to the top of the ERM mountain—the Treasury has been doing its best—and then, a little later, we should march interest rates as fast as we can down the mountain. Of course, with lower interest rates, the British consumer-elector feels better, and spends more on imported goods. The property-owning democracy sees the value of its property increasing and the prospect of unearned capital gain. Everyone is happy again, and people vote for the present Government. Where does that leave British manufacturing industry? It is at the top of the ERM mountain, withering away like the ark on Mount Ararat.
The wheel has come full circle. The curse of the early 1980s seems set to be repeated by the Government in the early 1990s, and British manufacturing industry will again suffer. I would like the Chief Secretary to accept the new clause, but of course he will not, because the Government have no interest in manufacturing industry.

Mr. Roy Hughes: I support the new clause. It essentially concerns capital allowances and manufacturing incentives, and—as my right hon. Friend the Member for Llanelli (Mr. Davies) said—it is a modest proposal.
The new clause illustrates the need to improve the efficiency of our manufacturing industry and to encourage investment, not only in capital goods but in training. Likewise, it points to the need for a major extension of our manufacturing industry. Some seasoned observers would say that we need to increase our manufacturing base by as much as 20 per cent.
We are trying to examine what Government policy is about. I suggested to the Chief Secretary that the Government claim that they have reduced the rate of corporation tax. Let me repeat the figures that I have been given by the Library, which show that British corporation taxes as a percentage of gross domestic product are much higher than those in our competitor countries. In 1988 the figures were as follows: United States, 2 per cent.; West Germany, 2 per cent.; France, 2.4 per cent.; and the United Kingdom, 6.2 per cent. I grant that the Chief Secretary has tried to give me some explanation of those figures.
If the Government are really keen to help our manufacturing industry to grow and become more competitive, they need to turn their attention more decidedly to tax matters.
Taxation, after all, impinges on training, research and development. The Government seem to be reluctant to invest in our universities and polytechnics to produce skilled people and new ideas. It is ideas that bring about the new industries and factories, and provide employment for our people. They help to build the economic strength of our country. We must build and create for ourselves the products that our people increasingly demand. At present we are importing many of those goods.
Not long ago, the Government were claiming that they had achieved an economic miracle. Their claim was illusory: it was nothing more than a South sea bubble. The position is summed up for me by the fact that West Germany has a trade surplus of about £50 billion, while we have a trade deficit of some £16 billion—or even more—in manufactured goods.
A few days ago, a senior Cabinet Minister resigned. He was very critical of West Germany. From my observations, over the past 40 years or so Germany has adopted a most responsible position in international affairs. Perhaps even more important, it has built a highly successful economy. The right hon. Member for Cirencester and Tewkesbury (Mr. Ridley) was the Secretary of State for Trade and Industry. He had an opportunity to do something about Britain's economic position and the difficulties in which it finds itself. Instead, the Government seem to have taken almost a fiendish delight in the destruction of much of our manufacturing industry. It is as though the Government thought that the economy was all about trade union organisation, the closed shop, and so on: the dragon had to be slain. That was their attitude. We had an illustration of that a week or two ago, with the attitude of the former Secretary of State for Trade and Industry to razing Ravenscraig to the ground—the last remaining bastion of the steel industry in Scotland. That has been the Government's attitude. How wrong can they be?
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Much in British manufacturing industry needed to be put right—I grant that. There was overmanning, inefficiency, poor management and, above all, a failure to invest. For the past decade or so the country has had all the benefits of North sea oil. Germany, with its strong currency and extremely favourable trading position, has had no such benefit. North sea oil revenues were paid out in social security benefits, and the rest has been invested overseas, presumably to fatten up our competitors. That money should have been used to restore the manufacturing base in this country.
The charge to be levelled against the Government is that they have essentially failed the nation. In fact, the more successful that we have become in our quest for invisible earnings, as my right hon. Friend the Member for Llanelli has pointed out, revenue from invisible earnings has tended to diminish. The more success there is, the greater will be the tendency to import manufactured goods, so there is no light at the end of the tunnel.
We have witnessed a major growth in the service industry, which, with great respect, produces nothing tangible. Manufacturing jobs have dramatically declined and, in turn, have tended to be replaced by low-paid jobs, many of them part time and largely for women. We have gone cap-in-hand to the Japanese and the Germans. We have said to them, "Come and invest in our country. Wales in particular at present has all the hallmarks of an

undeveloped country." Our trading deficit has got out of hand. The gap will not be bridged by a growth in tourism or by increased efforts on the part of the City of London.
New clause 2, in its limited way, points to the logic of our present situation. Our vast balance of payments problem is due to the size of our manufacturing base. A small base dictates the output of manufacturing industry. When we do not make in Britain the goods that people in Britain want, there is a demand for imports. In our case, the demand is substantial. Whatever gloss or disguise is put on that problem, it brings about the deficit in our balance of payments current account. For any lasting solution, we must rebuild our manufacturing industry. To do that, we need incentives. New clause 2 at least points the way.
We need a favourable exchange rate. We also need a marked decline in interest rates. We must compare our interest rates with those of our major competitors—indeed, they just do not compare. People are not being encouraged to invest. We must examine service costs—for example, water, gas and electricity. All that privatisation has done is to increase charges for those services. A credit boom did not help. Its only effect was to suck in more imports. The Chancellor should now talk to financial institutions and tell them to refrain from advertising and promoting credit.
An impediment to our economic success is the increasing decline of our infrastructure. Firms rightly point to extra cost, the direct result of congestion and difficulty in moving goods around.
Our record on research and development is far behind those of Germany and France. Our investment in training, for example, is reckoned to be only one tenth of that in West Germany. Training must be stimulated and innovation must be encouraged. New clause 2 is merely a pointer in the right direction.
We are to form an integrated single market in the EEC in 1992. Competition will be ever more fierce. We are ill-prepared, and much responsibility for that rests with the Government. What should be an exciting challenge is turning into a serious threat for Britain's whole economic future. Much of the responsibility for that dire situation is directly due to the Government.

Mr. Eric Martlew: I support new clause 2. As my hon. Friend the Member for Newport, East (Mr. Hughes) said, it points the way, but it is not the solution to the economic and manufacturing decline that we have seen under Governments of both parties in the past 20 years or perhaps even during the latter part of this century. One of the reasons why our manufacturing base has declined is that too few Members of Parliament have actually worked in industry. Too many come from the commercial sector, and too few actually know what it is like to work with out-dated equipment, to have personal skills but not to be given the tools to finish the job. To an extent, that is what new clause 2 is about.
The Department of Trade and Industry in Victoria street has been used as a siding for failed Cabinet Ministers. We saw a perfect example of that during the past week, but I had better draw a veil over that incident or the House will get excited again, although judging by the present attendance I doubt whether that would be likely.
The fact that we have had so many Secretaries of State for Trade and Industry in the past few years raises the


question of whether the Prime Minister really regards that aspect of the economy as important. The answer is clearly no. She seems to emphasise trade rather than industry and the latter is allowed to wither. As I have said, the House does not really understand industry because Parliament is based in the south of England, which has not had a great tradition of industry and of manufacturing objects that are useful. The south is very good at manufacturing money, insurance and banking and it is the location for the headquarters of many companies, but it has always been second best to the north in producing goods. Thus, when industry declines, the wealth of the north of England, Scotland and Wales also declines. We never saw the recession here in the south. When I walk through the suburbs of London, as opposed to the inner city areas, I am well aware that there is a great deal of affluence and that, although many people are working, pushing pieces of paper about, very few are actually manufacturing products.
When I worked in industry, I worked for a multi-national company and we used to look at the productivity levels of the various factories in Europe. We often lagged behind Germany, Holland and Switzerland, not because we were less skilled, although training in this country was not given the same premium as in others, but because we tended to be a low-wage economy. When considering investments and assessing how much it will cost to install a new machine to increase productivity, the pay-back time in a low-wage economy is much longer than in a higher-wage economy. That meant that we did not get any investment. Because the Germans were far more highly paid, it was much easier to justify such incentives in the German economy, so Germany tended to get new plant and equipment and its productivity was therefore much greater than ours. That was a tragedy. Indeed, it is a tragedy that low wages do not help the economy of any country. If we are trying to compete with the third-world countries—or even with second-world countries such as Singapore or Taiwan—with a low-pay, low-wage economy, we shall fail. We can succeed only if we are prepared to invest in manufacturing industry to the extent that our competitors in Germany, France, Holland and Japan are investing.
The Minister made great play of the amount of investment that we receive from Japan, Germany and other countries, but when did a British company last buy a Japanese car firm? When did we open a television assembly plant near Tokyo? The answer is that we have not done so. We are trying to attract foreign investment. Our economy is failing in important areas such as high technology. Yet we invest in Taiwan and Singapore. The captains of industry and banking in this country say, "There's a nice low-wage economy—we should be able to make healthy profits if we close our plants here and move them over there." They simply cannot come to terms with the fact that we need to be opening assembly plants ourselves, similar to the Datsun plant in Sunderland. Why are we not saying to British Aerospace, for example, "We should be opening similar plants in Japan and Germany"?
It is difficult for us to export to Japan because the Government have yet again failed to get rid of the unofficial tariffs that the Japanese have erected against us.

Although we are exporting, we are not successful. We have to rely on inward investment because the incentives given to our own companies are not great enough.
I was a member of a promotional organisation called Inward in the north-west of England. Our job was to attract inward investment from abroad, but we ultimately concluded that we should open an office in London—if we could get away with it—to try to attract industry from the south-east. To me, that illustrates the great divide between north and south. The south of England was regarded almost as a foreign country, and we felt that we should look there for our inward investment.
There are no incentives to invest. The Budget was supposed to provide an incentive to savers, and we can save only if we earn, and this country in general and its population in particular do not earn enough. If we were earning more, we could save more and invest more, but we are all aware that that has not been the case.
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As my hon. Friend the Member for Newport, East has said, we have probably the least well-equipped work force in western Europe in terms of training. We have failed to give our people the educational qualifications and the skills training that are needed to bring this country into the top rank of manufacturing and industrial countries. We have wasted our time on poor youth training schemes—they are better now—and on employment training, which beautified the countryside when we should really have been equipping our young people with skills to match those of the Germans, the Italians and the French. The Government should have taken a lead in that. Even in eastern Europe, work forces were given skills. That is why, even before there was talk of German unification, no resentment was felt towards the workers who were crossing the Berlin wall because the West Germans knew that those people were bringing with them skills which could be marketed in the west.
My constituency of Carlisle has recently been classed as a "boom town for the 90s" by the Henley Centre for Forecasting. Carlisle is the only city in the north of England to have been put in that category. Carlisle has developed despite the Government's refusal to give it industrial grants, and only because the Labour-controlled council has—with the private sector—developed schemes to make Carlisle attractive.
However, we suffer from one of the problems that has recurred in the debate—a poor infrastructure. We are a long way from the markets that we serve. Our rail service is inadequate. The road service to the south is reasonable, as anyone who travels down the M6 would accept, but the road to Europe—the road from the west of England to the east—is appalling. By any standard, the A69 and the A66 are appalling. I welcome the Government's decision to improve the A 1 to motorway standard, but we shall not see the benefit of that until the Government decide to develop the A66 as a dual carriageway.
That is another example of the way in which the Government are not generally prepared to invest in the infrastructure. My city is doing well not because of its manufacturing base but because of its service base, because it is the regional capital of Cumbria and because we now have a major shopping centre. Unfortunately, however, due to the Government's policies in the past, too many of the shops that are doing well in my constituency are selling goods that have been made abroad. We see the


words, "Made in Great Britain" on too few labels. It is always "Made in Germany"—I keep returning to Germany—or "Made in Japan".
The Government and the House must realise that unless we can manufacture more higher-quality goods and sell them abroad, no matter what we do with the exchange rate we shall go bankrupt at the end of the exercise if we do not put our balance of payments right. Great Britain Limited will not cease to exist, but it will cease to be an economic power just as it ceased to be a nation with an empire. We shall sink as Greece sank from being a great power with a major say in what went on in the world to a nation that is regarded as not in the front rank. I do not want to see that happen to Great Britain Limited. Unless we are prepared to take initiatives such as the one in new clause 2, we shall fail.
The new clause is not an answer, but it is part of an answer. In the Budget the Government once again entirely ignored the problem of the decline in manufacturing industry, but we ignore it at our peril. It is easy to make proposals in opposition, but I hope that the next Labour Government will recognise the need to manufacture more, invest in new equipment and re-equip our industries. Let us buy an H registration car for our industry, instead of running it on a B or C registration as we are doing now—let us give our workers the tools that they need so that we can compete equally with the continent and with the Japanese.

Mr. D. N. Campbell-Savours: Until a few moments ago I had not given the first thought to speaking in the debate. I have just attended a meeting with Ministers where we discussed industrial development and its implications for my constituency and the problems there. I do not wish to labour the point about my constituency. I simply wish to say a few words about the importance of measures such as that proposed in new clause 2 and why I believe that they are important.
Ministers will be aware that over the years I have always argued for a market analysis and that a free market in a mixed economy can be harnessed to deal with problems of unemployment wherever they arise in the country. I have never advocated massive state intervention. On occasions I have supported Government measures which I believed would have the desired effect. But there is a huge, gaping hole in the Government's position which persists today and from which I cannot understand why the Government refuse to move. I cannot altogether accept the Government's position, but I see the reasoning behind it. They believe that regional policies are not required in the sense that regional assistance is not necessary or could be reduced. That is not my case, but I understand the logic of the Government's case. They believe that it is not only the level of assistance that draws people to an area of high unemployment and that other factors should be taken into account.
I reject the proposition that the Government should stand idly aside while sectors of manufacturing industry are lost which are significant to the national economy. I wish to give an example that I used in Committee some years ago. It supports my case more vividly than any other example.
I was once a clock manufacturer. After I left the industry about 12 or 13 years ago I took an academic interest in it. I watched the destruction of the British quartz movement manufacturing industry. I saw it move

from two firms to one firm and then from one firm to, in effect, the end of the industry. When there was only one firm, I saw the failure of Smith's Industries, which was a big employer in Wishaw in Scotland, to invest in the technology in which the Germans were investing. The consequence was that, in effect, Smiths lost its market. Now it is not even in business.
I use the clock movement and quartz movement industry only as an example. Is it in the national interest to allow companies to lose labour, technology and expertise and allow an invasion of imports? That is the inevitable consequence of the Government's approach to industrial development. In my view, it is irresponsible to proceed on that basis. That automatically makes the case for returning to conditions in which some sort of Government machinery is responsible for defining the areas of manufacturing industry which should be supported by whatever means or mechanism to ensure their survival and, indeed, development.
Under the Labour Government the Government machinery took various forms. There was the Industrial Reorganisation Corporation in the 1960s, the National Enterprise Board in the 1970s and then the National Economic Development Council, which had working parties to deal with various aspects of manufacturing industry and produce policies to ensure industries' survival and investment in them. In microchip technology Inmos is an example of where such a policy might be said to have been successful. One cannot avoid adopting such an approach to the modern economy.
I do not envisage armies of civil servants sitting around in offices making macro-economic commercial decisions on who should invest where and how much. When arrangements such as I have described are restored, I envisage a far greater role for the private sector in terms of manufacturing, distribution, retail, banking or other experience in taking decisions. However, there is a role for people to ease our industry into a position in which it can compete effectively with other countries.
To return to quartz clock movements, it seems that a product of which the Germans can produce tens of millions, the Japanese can produce hundreds of millions and the Koreans and Taiwanese can turn out could be turned out by Britain. Yet those countries send the mechanisms to the United Kingdom. The product could be made by British manufacturers. Why cannot Britain produce its own quartz clock movements? Why must every clock made in the United Kingdom have a Japanese or other foreign movement in it? It is because we have not taken a strategic decision on the clock industry. As I said, I have no family or other connection with the clock industry, but only an academic interest in what happens in so far as it illustrates my case.
Surely a strategic decision should be taken and Britain should have a quartz producer that is capable of feeding case makers throughout the United Kingdom with movements to put in their clocks which they could then export round the world. There would be nothing wrong with that. It would not require the Government to bend an ideological principle or commitment to accept that proposition. It requires some flexibility and understanding that someone, somewhere must take a decision and make sure that resources are available. Whether someone wants to build a factory in the middle of Westminster or in


John o' Groats is not a consideration here. We must simply make a decision to ensure that the products are made in the United Kingdom.
The Minister might say, "Leave it to the market." When the Minister replied to me earlier, he said that he subscribed to the market. The market is not capable of taking the decision. While the market might identify the product, it might say that the investment required and the return on that investment was too long-term. No entrepreneur would be willing to enter the market on that basis. That is the dilemma. In many product areas short-term decisions are taken in the knowledge that, were longer-term ones taken, those products would not be viable. In the balance of calculation about how we frame our manufacturing industrial policy, I wonder whether we reasonably consider the longer-term implications of the decisions that should be taken.
We cannot rely exclusively on the market, although we do not want the state to interfere by saying, "Put a factory up there. Here is all the money. It does not matter who you hire." We need the state to put together a package whereby we give birth to industry and the private sector is pump-primed to ensure that the manufacture of whatever product takes place in the United Kingdom in the national interest.
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I have picked on one product, quartz clock movements—what an obscure product—but there are many others that one could cite. If one reads the Monthly Digest of Statistics one discovers areas in which there is a huge gap between the level of exports and imports. One also discovers product areas in which there is a preponderance of imports in the market. Those areas of heavy import penetration should be identified.
I believe that my hon. Friends in the trade and industry team have published some figures that identify particular problem product areas. Those areas should be targeted. I am not asking for massive state funding to get industries off the ground, but the Government should devise policies to ensure that somehow those product areas lift off as centres of manufacturing industry. To some extent, the new clause meets that objective as it is the vehicle for identifying
in the Standard Industrial Classification issued by the Central Statistical Office
particular areas that might be targeted. I believe that I have not mistaken the aim of the new clause.
In the past nine years we have been utterly reliant on the market to attract industry and, in that time, I have proposed that we should target particular areas to give birth to manufacturing industry. However, we are now moving to a different scenario. On our doorstep in eastern Europe a huge, new economic power is about to develop. In the short term, eastern Europe will offer cheap labour. It also has an absence of traditional trade union areas of restrictive practice. Many of the factories set up in western Europe operate on the basis of green-field sites even within the trade union legislative umbrella. Following the liberalisation of eastern Europe the trade unions created may mirror the trade union structure created in Germany after the war—I understand from my hon. Friends that Britain was largely responsible for that. Trade union

development in eastern Europe may more closely mirror the industrial complexion of Germany than of other parts of the world, including parts of our manufacturing base.
New trade union representational arrangements, green-field sites, new plant and development, cheap labour and the pivotal position of east European countries will mean that their industries will have a considerable advantage over companies that locate in the United Kingdom. After all, those countries will have far easier access to Europe's main markets, despite the advent of the channel tunnel. How will Britain compete if we rely exclusively on the market mechanisms to which the Minister is totally committed? To some extent, I share his commitment, but how can we possibly compete?
I understand that reservations have been expressed by some industrialists in West Germany as they appreciate that the drift will be for new plants and factories to develop in Czechoslovakia, Poland and particularly in Hungary. Such developments will also take place in other parts of eastern Europe as they open up. If that happens, how will we compete? In those conditions we might be forced to reassess whether regional policies are required to deal with the problems in areas such as west Cumberland.
In three years' time, when we are through the hoop of at least some of the difficulties that will arise in eastern Europe, for which the European Bank for Reconstruction and Development will take responsibility, capital will be funnelled into eastern Europe to take advantage of the new markets created. I do not think that it will then be easy for the United Kingdom to attract industry to areas such as my own. In those conditions, the new clause would be even more important because at least it addresses the problem of targeting assistance into manufacturing companies. At least that would give us a competitive edge against companies starting up in other parts of Europe, especially eastern Europe.
Although I want eastern Europe to develop, I am extremely concerned about its implications for the United Kingdom, particularly if we have a Government who remain ever wedded, in an unrelenting fashion, to the principle of a free market that is able to respond to the industrial and employment needs of our people. I cannot place my faith in that analysis and I believe that there are some Conservative Members who share my concerns.
The new clause does not require any massive compromise on the Government's ideological stance. I believe that the Government should look favourably upon it. Despite any reservations that the Government may have about the new clause—its wording, the appeal system or the extent to which it can be implemented—were Ministers to say that they took on board its central thrust, I am sure that British industry would respond favourably.

Mr. Norman Lamont: This has been an interesting and wide-ranging debate. The hon. Member for Berwick-upon-Tweed (Mr. Beith) ranged particularly wide and made a real motherhood speech. In a debate that was meant to be about capital allowances, he managed to introduce the channel tunnel, proportional representation and his favourite subject, the ERM, all of which he felt would solve whatever investment problems existed in the British economy.
I am sorry that the hon. Gentleman is not in his place because I wanted to explain why I had not given the cost of the Opposition new clause. It is difficult to give the cost because it depends on how successful the proposal would


be in generating new investment. As drafted, it is not restricted specifically to new investment. It would apply to existing investment, so potentially it would have a huge deadweight cost. Disregarding that, if it attracted just new investment, the cost might be about £260 million in 1991–92 and a further £360 million in 1992–93. While the costs are difficult to quantify, if the hon. Member for Derby, South (Mrs. Beckett) were successful in her proposition and it brought forward more investment, the costs would be higher.
The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) made an interesting speech and was concerned that I had not referred to the balance of payments and current account deficit. I did not do so because I had not anticipated the debate being so wide-ranging. I differ from the way in which the right hon. Gentleman views the current account deficit—I do not regard it as the profit and loss account of the nation, as many Opposition Members appear to do. As I have said on many occasions, the current account deficit reflects much more a phenomenon of excess demand in the United Kingdom and not of a loss of competitiveness. If it were a loss of competitiveness, we should not be seeing the extraordinary growth in exports, particularly manufactured exports, that we have witnessed in the recent past, particularly in the past 12 months.
Although the deficit must be reduced, it is much more a symptom of excess demand—of inflation—than of anything else. Inflation is the main problem. When the hon. Member for Derby, South says that we do not recognise the problems, I assure her that we have always recognised inflation as a problem. Indeed, we recognise it much more than the Labour party is prepared to say it is a problem. We are absolutely determined to get inflation down and we regard it as unacceptably high.

Mr. Denzil Davies: Does the right hon. Gentleman accept that a reason for the deficit may be the fact that there is a structural problem in relation to British industry? In large areas of the production of consumer goods, are we not producing because the production is done abroad?

Mr. Lamont: I do not accept that the current account deficit reflects structural problems. The great structural change, to which the right hon. Gentleman refers, that occurred in the British economy took place in the early part of this decade. The structural change in our current account deficit has occurred in the last few years—in the period when demand has plainly been excessive—when the Government responded to the conditions of 1987, a response which, with hindsight, was over-generous. But it is not a structural problem because the structural changes—the loss of some manufacturing capacity, the most inefficient and unprofitable—all occurred in the early 1980s, whereas the phenomenon of the current account deficit is more recent.
The right hon. Member for Ashton-under-Lyne dwelt on manufacturing, and I shall say more about that, but he also played down the role of the service industries in the economy and referred to services as though they were totally dependent on manufacturing. I suggest that that is the wrong way to look at it. Services and manufacturing are interdependent. Some manufacturing industries have a close relationship with service industries. For example, the output of the computer industry is heavily influenced by the demands of the financial services industry. The idea

that services are not wealth-creating or are dependent entirely on manufacturing is a myopic and out-of-date view.
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I freely agree that manufacturing is an important part of the economy, but it is no use harking back to an age that is past. In the early part of the century, this country enjoyed about 75 per cent. of the output of the world's textile industry. Had Opposition Members been present over the years, they would have been complaining every decade as that percentage fell, reflecting an inevitable transfer of manufacturing capacity to some of the poorer countries. We should not be against that, as it has been greatly to the advantage of those countries. It was inevitable as poorer countries industrialised and came into the world trading system.
The right hon. Member for Ashton-under-Lyne also felt that the 25 per cent. allowances under the new regime did not match depreciation. As he will recognise on reflection, writing-down allowances of 25 per cent. give an effective eight-year write-off period for machinery and plant, with relief, of nearly 60 per cent. of the cost in the first three years. The rate of depreciation allowed by the tax system compares well with commercial rates of depreciation in most situations. Obviously it varies, according to the assets and from one company to another, and there are also some special arrangements for short-life assets.
The right hon. Member for Llanelli (Mr. Davies) made an interesting and entertaining speech, as he always does. He began by saying that the Government did not understand monetarism, a point that he often makes. I think that he sometimes tries to disguise the fact that he is a true monetarist, as we know from his remarks that interest rates are the best way of controlling monetary growth and that credit controls are ineffective. The right hon. Gentleman, when a Treasury Minister, studied these matters, understood them and drew the correct conclusions. That is why he occasionally feels that he has a licence to attack the Government for not being monetarist enough. I sometimes think that he is trying to cover up his own position.
The right hon. Gentleman felt that the 1984 reforms had helped the service sector as opposed to manufacturing. It is true to a point that, by its nature, the reduction in allowances—which went more to manufacturing—benefited the service sector, but it depends on the profitability of the individual company. The changes gave the greatest incentive and reward to the most profitable companies, including profitable manufacturing companies. That is an important point to make about the new tax regime.
Much of the debate has centred not on the new clause but on the economy. Indeed, it has been an economic philosophy debate about the role of manufacturing in the economy. As I said at the outset, manufacturing is extremely important to the traded sector. But Opposition Members are in danger of disregarding the other three quarters of the economy which comes from non-manufacturing. It is ridiculous to regard all wealth creation as coming from one sector.
I said that if one looked at manufacturing as a share of GDP, one found that the transition in this country, which happened under the last Labour Government—the reduction in manufacturing as a share of GDP—has gone


on for decades. It mirrors what has happened in European countries and in north America. The share of GDP represented by manufacturing in this country is comparable with the situation in France and America.
In recent years, however, we have seen some encouraging signs, with remarkable growth in productivity in manufacturing. In the recent past we have also witnessed strong growth in manufacturing investment, which has grown by an average of 8 per cent. per year since 1983, compared with an average of 1.5 per cent. per year under the last Labour Government.
I said that foreign investment had played a part, which illustrates that foreign companies do not regard the tax regime for taxing profits and giving incentives for investment as anything other than attractive. If they did, we should not be doing so well as we have been in attracting foreign investment.
The hon. Member for Carlisle (Mr. Martlew) asked a strange question. He asked when a British firm last took over a Japanese car company. I was not aware that the Japanese had taken over any British car firms. What they have done is to invest in green field sites. Nissan and Toyota have been new green field investments, which should be welcomed by everyone, including the Opposition. I am sure that the hon. Member for Derby, South will agree, since Toyota is in her constituency, that there is no reason why Nissan and Toyota should not be regarded as just as much a part of the British economy as the Ford motor company was in the past.
The hon. Member for Workington (Mr. Campbell-Savours) referred to his earlier speech on clocks, which I remember because I was here when he made it. The clock does not seem to have moved on very much since then. He said that he was in favour of market forces and did not favour interventionism. He went on to say that he favoured only a little bit of interventionism, but that sectors should be identified and there should be a bit of money in the resources. I fear that once we begin that argument, it is difficult not to do so with ever-gathering enthusiasm, as the Labour party does.
The hon. Gentleman also referred to Inmos, although he was not quite sure what it did. He said that we were rather good at it, but it was a complete disaster.

Mr. Denzil Davies: It is still there.

Mr. Campbell-Savours: My right hon. Friend says that it is still there.
The Chief Secretary to the Treasury seems to question the balance between interventions and markets. Why is it that the Japanese target in that way? If they can do it, why can we not do it?

Mr. Lamont: This is not a debate on the Japanese economy.

Mr. Campbell-Savours: But the Japanese do it.

Mr. Lamont: I do not believe that the Japanese pursue the model that the hon. Gentleman describes. It may have been the model in Japan after the second world war; the Japanese may have a different relationship with their banking system, but that is a different matter. However, the relationship between the state and the industry is not as the hon. Gentleman describes it. [HON. MEMBERS: "MITI."] I hear Members on the Opposition Front Bench muttering about the Ministry of International Trade and Industry in Japan, but the role of MITI has changed

considerably. The striking factor about the Japanese motor industry is the sheer number of different, competing companies, which is more significant than any alleged relationship with MITI.
There has been much argument about the state of manufacturing industry in this country. I can give no better authority than the director general of the Confederation of British Industry, who remarked a few weeks ago:
We enter the 1990s with the supply side of the British economy in comparatively better shape than at any time in our history.
No doubt Labour Members will describe that as hype, belief in a miracle and exaggerated Tory propaganda, but it is the considered judgment of the director general of the CBI. I much prefer his opinion to anything that the Labour party has put forward in this debate.

Mrs. Beckett: This has been a most interesting debate. I have a feeling that I may have misled the hon. Member for Berwick-upon-Tweed (Mr. Beith) earlier. I was so amazed by the figures that he gave on the cost of our new clause that I gave an example of the implications that it would have for an individual company. I also stressed that I thought his proposals were completely exaggerated. I am not sure whether I made that as clear to the hon. Gentleman as I would have wished, but no doubt he will deduce it from the record.
When he opened the debate for the Government, the Chief Secretary talked about growth and inflation during the decade, and how the Government's record was good and stood up well to any comparison. As the hon. Member for Berwick-upon-Tweed said, the Chief Secretary did not say anything else about inflation, and we all know why.
The Chief Secretary talked as though growth had been spectacularly higher than at any time in our history. Growth rates during the decade as a whole were no higher than those that we had generally experienced before the initial oil crisis of the early 1970s. Although we were all pleased by the levels of growth achieved, they were not, I repeat, anything to boast about in terms of our general history and the development of the country's economy.

Mr. Norman Lamont: What about our growth rate in the 1980s—was it or was it not above the EC average, and was it or was it not below that in the 1970s?

Mrs. Beckett: From memory, if one leaves out—as the Chief Secretary prefers to do—the figures at the start of this Government's period of office, from 1979 to 1980, the answer is yes. However, once those figures are included and we look at the Government's entire period in office, the picture is different. I made that point earlier. [HON. MEMBERS: "There was no oil."] As I hear from the Benches behind me, there was the minor matter of the large revenues that the Government enjoyed from the North sea which were not available to any previous Government. One must question the Chief Secretary's use of that set of statistics.
The Chief Secretary referred, however briefly, to the problems of the current account and suggested that part of the reason for them was increased investment. He said that investment goods had contributed to the deficit. As I am sure the Chief Secretary is aware, the proportion of imports of goods for investment and production—we accept that our imports are extremely high—is no higher than in the 1970s and early 1980s. If anything, the


proportion has declined and many of the goods described in the categories of production and investment are not what most of us would think of in relation to the manufacturing industry. They include X-rays and coconut. I understand that in 1988, for which I have the figures, only 18.6 per cent. of manufactured imports were pure capital goods. Therefore, we can dismiss the argument that it is only the high level of goods for investment that has contributed to our current account deficit.
The Chief Secretary said that there had been a strong growth in manufacturing investment, particularly in the past couple of years. He suggested that some commentators thought that there was a bit of a change and that there would be an even greater improvement in the near future. That is the most extraordinary claim of all, apart from the one that the Chief Secretary has just made and to which I shall return. Manufacturing investment as a proportion of our gross domestic product has declined since 1979 and is still nowhere near the 1979 levels. Even if we consider it in, not quite cash terms but constant prices, it returned above the 1979 level only as late as 1988.

Mr. Andrew Rowe: I had always understood that one of the difficulties about computing the percentage of investment in manufacturing industry was that when vertically integrated companies decided, for example, to hive off their transport function to an independent company, that became, by definition, no longer a manufacturing function. One of our difficulties in comparing the figures is that a great deal of what used to be called manufacturing is now called service.

Mrs. Beckett: That is one of the most spurious arguments that I have heard for a long time. There is no doubt that, under this Government, every section of the collection of statistics has been degraded and, in its use, been distorted. I am quarrelling not with the statisticians, but with the politicians who try to make a case that will not stand up to close examination. However one measures manufacturing investment and compares it with that of our competitors, there is no dispute—not even from the Government—about the figures that I have just given: as a percentage of gross domestic product, manufacturing investment has declined and, at constant prices, it has only just climbed back above the level from which it fell in 1979.
6 pm
The Chief Secretary had the cheek to say a moment ago that since 1983 manufacturing investment has grown by an average of 8 per cent. compared with 1.5 or 2 per cent. under the last Labour Government. I remind him of a recent answer that the Chancellor gave my hon. Friend the Member for Carmarthen (Mr. Williams) which showed clearly what would have happened had the comparatively lower rates continued. I accept that there was a smaller rate of increase, year by year, in manufacturing investment under the last Labour Government. Nevertheless, had that rate of increase been attained by this Government manufacturing investment would be almost £2 billion higher than it is today.
The Chief Secretary then suggested that investment might be improving; we certainly hope so, but we see little sign of that in his or anyone else's forecasts.
The right hon. Gentleman asked whether the Opposition favour tax allowances of the sort trailed in our new clause. I thought that we had made it clear that we

favour the use of tax allowances for investment, although we should certainly want them to be well targeted and used primarily by manufacturing industry. There is no difficulty about that, and I am not sure why the right hon. Gentleman thought that there might be.
The Chief Secretary criticised me for suggesting that companies should not seek to increase their earnings per share. Of course, I understand that companies want to increase their earnings per share—that is what the market wants. I pointed out that we do not want companies to do this by fiddling accounting rules or by launching takeovers; we want them to improve their earnings by improving the performance of the company—a rather different point.

Mr. Campbell-Savours: The Minister put a price on the amendment, which reads,
may be prescribed by way of regulations made under this subsection".
Given that the goods covered are not classified in the new clause, surely it is impossible to price it.

Mrs. Beckett: My hon. Friend is right. The new clause offers scope for careful targeting, which is why it was drafted in that way. To be fair to the Chief Secretary, he said that his costing was something of a guess. We must be kind to the Government; they have to find something to say and their guesses are growing increasingly desperate with every day that passes—

Mr. Campbell-Savours: rose—

Mrs. Beckett: If my hon. Friend does not want to he kind to the Chief Secretary, I am happy to let him have another go.

Mr. Campbell-Savours: The Government spread myths throughout the country about the cost of Labour's programme. If they included in their assessment the figure that the Minister gave at the Dispatch Box, it would be a gross misrepresentation. Certain products might be covered at a cost of less than £1 million. It is quite impossible to assess the cost of the new clause.

Mrs. Beckett: My hon. Friend is right.

Mr. Norman Lamont: rose—

Mrs. Beckett: If the right hon. Gentleman must.

Mr. Lamont: The hon. Lady gave an astonishing reply to the hon. Member for Workington (Mr. Campbell-Savours). Is she really suggesting different rates of allowances, defined for specific sectors within manufacturing? That is what the hon. Member for Workington suggested, and she knows it.

Mrs. Beckett: My hon. Friend suggested no such thing. The Chief Secretary cannot have been listening. The new clause suggests no such thing, either. My hon. Friend merely suggested that it was important to define carefully the categories within which the allowance might be made, which is not the same as suggesting different rates.
The Minister said that there was not a scrap of evidence that a lack of capital allowances is harming investment. It is one thing to suggest that there has not been a dramatic deterioration in the figures since the abolition of the allowances—although there has certainly not been much improvement, as they are still low. But the whole point of the new clause was to suggest a slight alleviation of the


predicament of interest rates being so high. All the statistics and Government and other forecasts for the recent period have shown the problems that industry faces because of interest rates, which are expected to have a damaging effect on investment, and that is what the new clause attempts to deal with.
As to whether the problem will do long-term damage, I remind the Chief Secretary of what the April-May issue of "European Economy" magazine said. The Commission drew attention to levels of investment across the Community and referred to the Community's co-operative growth strategy—and to the fact that across the Community the growth of investment is stronger than the growth of gross domestic product. The Commission hoped for an expansion of 4 per cent. in real terms this year. However, the magazine also says that there has been a marked slow-down in some countries and says of the United Kingdom:
In this last country, gross fixed capital formation could actually decrease in 1990.
It is significant that the Commission pointed out that that aspect is improving, although not as fast as it would like, in most Community countries; so this is another example of our competitiveness being harmed—and it is already poor.
I referred earlier to the world competitiveness report produced by World Economic Forum. It lists the United Kingdom as a mediocre 12th of 23 countries, with its problems compounded by the fact that we are 16th in the table when measured by per capita investment in education, and 19th measured by the numbers enrolled in higher education. That, too, can only harm our competitive position.
Several of my hon. Friends have made excellent speeches drawing attention to the problems of manufacturing industry which we believe the new clause might, in a small and temporary way, help to alleviate. The Chief Secretary ended by quoting the CBI, and I should like to do the same. The CBI called on the Government to make precisely this sort of assistance for industry a priority in this Finance Bill. The then president of the CBI referred to the danger that investment plans will be undermined
by the high cost of capital, the squeeze on profits, and slower growth".
He spoke of these risks
undermining Britain's growth potential throughout the decade".
That is the danger.
Throughout this debate the Chief Secretary has failed to refer to our enormous balance of payments deficit, and it has clearly emerged, as we feared it would, that the Government are not prepared to take steps or to consider measures to alleviate the problems faced by British industry—because they refuse to accept that they exist. One of the worst features of the Chief Secretary's remarks was his pooh-poohing of the idea that manufacturing industry was important. He claimed that the Opposition say that it is all that matters in wealth creation. He must be well aware that, from the point of view of our overseas earnings and our traded sector, it is manufacturing that is the wealth creator and the source of all our wealth. It could be the basis of a secure and successful future for this country, but it is plain that under this Government such a future holds no security.

Question put, That the clause be read a Second time:—

The House divided: Ayes 207, Noes 264.

Division No. 297]
[6.10 pm


AYES


Adams, Allen (Paisley N)
Foster, Derek


Allen, Graham
Foulkes, George


Anderson, Donald
Fraser, John


Archer, Rt Hon Peter
Fyfe, Maria


Armstrong, Hilary
Galloway, George


Ashdown, Rt Hon Paddy
Garrett, John (Norwich South)


Ashley, Rt Hon Jack
Garrett, Ted (Wallsend)


Ashton, Joe
George, Bruce


Banks, Tony (Newham NW)
Godman, Dr Norman A.


Barnes, Harry (Derbyshire NE)
Golding, Mrs Llin


Barron, Kevin
Gordon, Mildred


Beckett, Margaret
Gould, Bryan


Beith, A. J.
Graham, Thomas


Bell, Stuart
Grant, Bernie (Tottenham)


Benn, Rt Hon Tony
Griffiths, Nigel (Edinburgh S)


Bennett, A. F. (D'nt'n &amp; R'dish)
Griffiths, Win (Bridgend)


Bermingham, Gerald
Hardy, Peter


Bidwell, Sydney
Harman, Ms Harriet


Blunkett, David
Hattersley, Rt Hon Roy


Boateng, Paul
Haynes, Frank


Boyes, Roland
Heal, Mrs Sylvia


Bradley, Keith
Healey, Rt Hon Denis


Bray, Dr Jeremy
Henderson, Doug


Brown, Gordon (D'mline E)
Hinchliffe, David


Brown, Nicholas (Newcastle E)
Hogg, N. (C'nauld &amp; Kilsyth)


Bruce, Malcolm (Gordon)
Home Robertson, John


Buckley, George J.
Hood, Jimmy


Caborn, Richard
Howarth, George (Knowsley N)


Callaghan, Jim
Howell, Rt Hon D. (S'heath)


Campbell, Menzies (Fife NE)
Howells, Geraint


Campbell, Ron (Blyth Valley)
Hoyle, Doug


Campbell-Savours, D. N.
Hughes, John (Coventry NE)


Canavan, Dennis
Hughes, Robert (Aberdeen N)


Carlile, Alex (Mont'g)
Hughes, Roy (Newport E)


Carr, Michael
Hughes, Simon (Southwark)


Clark, Dr David (S Shields)
Janner, Greville


Clarke, Tom (Monklands W)
Jones, Barry (Alyn &amp; Deeside)


Clay, Bob
Jones, Ieuan (Ynys Môn)


Clelland, David
Kennedy, Charles


Clwyd, Mrs Ann
Lambie, David


Cohen, Harry
Lamond, James


Cook, Frank (Stockton N)
Leighton, Ron


Cook, Robin (Livingston)
Litherland, Robert


Corbett, Robin
Lloyd, Tony (Stretford)


Cousins, Jim
McAllion, John


Crowther, Stan
McAvoy, Thomas


Cryer, Bob
McCartney, Ian


Cummings, John
Macdonald, Calum A.


Cunliffe, Lawrence
McFall, John


Cunningham, Dr John
McKelvey, William


Darling, Alistair
McLeish, Henry


Davies, Rt Hon Denzil (Llanelli)
Maclennan, Robert


Davies, Ron (Caerphilly)
McNamara, Kevin


Davis, Terry (B'ham Hodge H'l)
McWilliam, John


Dewar, Donald
Madden, Max


Dixon, Don
Mahon, Mrs Alice


Dobson, Frank
Marek, Dr John


Doran, Frank
Marshall, David (Shettleston)


Duffy, A. E. P.
Marshall, Jim (Leicester S)


Dunnachie, Jimmy
Martin, Michael J. (Springburn)


Dunwoody, Hon Mrs Gwyneth
Martlew, Eric


Eadie, Alexander
Maxton, John


Eastham, Ken
Meale, Alan


Evans, John (St Helens N)
Michael, Alun


Ewing, Harry (Falkirk E)
Michie, Bill (Sheffield Heeley)


Ewing, Mrs Margaret (Moray)
Michie, Mrs Ray (Arg'l &amp; Bute)


Fatchett, Derek
Mitchell, Austin (G't Grimsby)


Faulds, Andrew
Moonie, Dr Lewis


Field, Frank (Birkenhead)
Morgan, Rhodri


Fields, Terry (L'pool B G'n)
Morley, Elliot


Fisher, Mark
Morris, Rt Hon A. (W'shawe)


Flannery, Martin
Morris, Rt Hon J. (Aberavon)


Flynn, Paul
Mullin, Chris


Foot, Rt Hon Michael
Murphy, Paul






Nellist, Dave
Smith, Andrew (Oxford E)


Oakes, Rt Hon Gordon
Smith, C. (Isl'ton &amp; F'bury)


O'Brien, William
Smith, J. P. (Vale of Glam)


O'Neill, Martin
Snape, Peter


Orme, Rt Hon Stanley
Spearing, Nigel


Owen, Rt Hon Dr David
Steinberg, Gerry


Parry, Robert
Stott, Roger


Patchett, Terry
Strang, Gavin


Pendry, Tom
Straw, Jack


Pike, Peter L.
Taylor, Mrs Ann (Dewsbury)


Powell, Ray (Ogmore)
Taylor, Matthew (Truro)


Prescott, John
Thomas, Dr Dafydd Elis


Primarolo, Dawn
Vaz, Keith


Quin, Ms Joyce
Viggers, Peter


Radice, Giles
Wallace, James


Randall, Stuart
Wardell, Gareth (Gower)


Redmond, Martin
Wareing, Robert N.


Rees, Rt Hon Merlyn
Watson, Mike (Glasgow, C)


Reid, Dr John
Welsh, Andrew (Angus E)


Richardson, Jo
Welsh, Michael (Doncaster N)


Rooker, Jeff
Wigley, Dafydd


Ross, Ernie (Dundee W)
Williams, Rt Hon Alan


Rowlands, Ted
Williams, Alan W. (Carm'then)


Ruddock, Joan
Wilson, Brian


Salmond, Alex
Winnick, David


Sedgemore, Brian
Wise, Mrs Audrey


Sheerman, Barry
Young, David (Bolton SE)


Sheldon, Rt Hon Robert



Shore, Rt Hon Peter
Tellers for the Ayes:


Short, Clare
Mr. Allen McKay and


Sillars, Jim
Mr. Martyn Jones.


Skinner, Dennis





NOES


Alexander, Richard
Channon, Rt Hon Paul


Alison, Rt Hon Michael
Chapman, Sydney


Amery, Rt Hon Julian
Chope, Christopher


Amos, Alan
Churchill, Mr


Arbuthnot, James
Clark, Hon Alan (Plym'th S'n)


Arnold, Jacques (Gravesham)
Clark, Sir W. (Croydon S)


Arnold, Sir Thomas
Clarke, Rt Hon K. (Rushcliffe)


Aspinwall, Jack
Conway, Derek


Atkins, Robert
Coombs, Anthony (Wyre F'rest)


Atkinson, David
Couchman, James


Baker, Rt Hon K. (Mole Valley)
Cran, James


Baker, Nicholas (Dorset N)
Critchley, Julian


Baldry, Tony
Currie, Mrs Edwina


Batiste, Spencer
Curry, David


Beaumont-Dark, Anthony
Davies, Q. (Stamf'd &amp; Spald'g)


Bellingham, Henry
Day, Stephen


Bendall, Vivian
Devlin, Tim


Bennett, Nicholas (Pembroke)
Dickens, Geoffrey


Benyon, W.
Dicks, Terry


Bevan, David Gilroy
Douglas-Hamilton, Lord James


Blackburn, Dr John G.
Dover, Den


Blaker, Rt Hon Sir Peter
Durant, Tony


Body, Sir Richard
Eggar, Tim


Boscawen, Hon Robert
Emery, Sir Peter


Boswell, Tim
Evans, David (Welwyn Hatf'd)


Bowden, A (Brighton K'pto'n)
Evennett, David


Bowden, Gerald (Dulwich)
Fairbairn, Sir Nicholas


Bowis, John
Fallon, Michael


Boyson, Rt Hon Dr Sir Rhodes
Farr, Sir John


Braine, Rt Hon Sir Bernard
Favell, Tony


Brandon-Bravo, Martin
Fenner, Dame Peggy


Bright, Graham
Field, Barry (Isle of Wight)


Brown, Michael (Brigg &amp; Cl't's)
Finsberg, Sir Geoffrey


Bruce, Ian (Dorset South)
Fishburn, John Dudley


Buchanan-Smith, Rt Hon Alick
Fookes, Dame Janet


Buck, Sir Antony
Forman, Nigel


Budgen, Nicholas
Forsyth, Michael (Stirling)


Burns, Simon
Forth, Eric


Burt, Alistair
Franks, Cecil


Butler, Chris
Freeman, Roger


Butterfill, John
French, Douglas


Carlisle, John, (Luton N)
Fry, Peter


Carlisle, Kenneth (Lincoln)
Gale, Roger


Carrington, Matthew
Gardiner, George


Carttiss, Michael
Garel-Jones, Tristan


Cash, William
Gill, Christopher





Glyn, Dr Sir Alan
Marshall, Sir Michael (Arundel)


Goodlad, Alastair
Martin, David (Portsmouth S)


Goodson-Wickes, Dr Charles
Mates, Michael


Gorman, Mrs Teresa
Maude, Hon Francis


Gow, Ian
Mawhinney, Dr Brian


Grant, Sir Anthony (CambsSW)
Maxwell-Hyslop, Robin


Greenway, Harry (Ealing N)
Mayhew, Rt Hon Sir Patrick


Greenway, John (Ryedale)
Meyer, Sir Anthony


Gregory, Conal
Mitchell, Andrew (Gedling)


Griffiths, Peter (Portsmouth N)
Monro, Sir Hector


Grist, Ian
Moss, Malcolm


Ground, Patrick
Mudd, David


Grylls, Michael
Nelson, Anthony


Hague, William
Nicholls, Patrick


Hamilton, Hon Archie (Epsom)
Norris, Steve


Hamilton, Neil (Tatton)
Onslow, Rt Hon Cranley


Hanley, Jeremy
Oppenheim, Phillip


Hannam, John
Parkinson, Rt Hon Cecil


Hargreaves, Ken (Hyndburn)
Patnick, Irvine


Harris, David
Pattie, Rt Hon Sir Geoffrey


Haselhurst, Alan
Peacock, Mrs Elizabeth


Hayes, Jerry
Porter, David (Waveney)


Hayhoe, Rt Hon Sir Barney
Raffan, Keith


Hayward, Robert
Rathbone, Tim


Heathcoat-Amory, David
Renton, Rt Hon Tim


Hicks, Mrs Maureen (Wolv' NE)
Riddick, Graham


Hicks, Robert (Cornwall SE)
Ridsdale, Sir Julian


Higgins, Rt Hon Terence L.
Rifkind, Rt Hon Malcolm


Hill, James
Roberts, Sir Wyn (Conwy)


Hind, Kenneth
Roe, Mrs Marion


Hogg, Hon Douglas (Gr'th'm)
Rossi, Sir Hugh


Hordern, Sir Peter
Rost, Peter


Howard, Rt Hon Michael
Rowe, Andrew


Howarth, G. (Cannock &amp; B'wd)
Ryder, Richard


Howell, Ralph (North Norfolk)
Shaw, David (Dover)


Hughes, Robert G. (Harrow W)
Shaw, Sir Giles (Pudsey)


Hunter, Andrew
Shaw, Sir Michael (Scarb')


Irvine, Michael
Shelton, Sir William


Irving, Sir Charles
Shephard, Mrs G. (Norfolk SW)


Jack, Michael
Shepherd, Colin (Hereford)


Janman, Tim
Shepherd, Richard (Aldridge)


Jessel, Toby
Sims, Roger


Johnson Smith, Sir Geoffrey
Skeet, Sir Trevor


Jones, Gwilym (Cardiff N)
Smith, Tim (Beaconsfield)


Jones, Robert B (Herts W)
Soames, Hon Nicholas


Jopling, Rt Hon Michael
Speller, Tony


Key, Robert
Spicer, Sir Jim (Dorset W)


Kilfedder, James
Spicer, Michael (S Worcs)


King, Roger (B'ham N'thfield)
Squire, Robin


Kirkhope, Timothy
Stanbrook, Ivor


Knapman, Roger
Stanley, Rt Hon Sir John


Knight, Greg (Derby North)
Steen, Anthony


Knight, Dame Jill (Edgbaston)
Stern, Michael


Knowles, Michael
Stevens, Lewis


Knox, David
Stewart, Allan (Eastwood)


Lamont, Rt Hon Norman
Stewart, Andy (Sherwood)


Lang, Ian
Stradling Thomas, Sir John


Lawrence, Ivan
Sumberg, David


Lee, John (Pendle)
Summerson, Hugo


Leigh, Edward (Gainsbor'gh)
Tapsell, Sir Peter


Lester, Jim (Broxtowe)
Taylor, Ian (Esher)


Lightbown, David
Taylor, Teddy (S'end E)


Lloyd, Sir Ian (Havant)
Tebbit, Rt Hon Norman


Lloyd, Peter (Fareham)
Temple-Morris, Peter


Lord, Michael
Thompson, D. (Calder Valley)


Lyell, Rt Hon Sir Nicholas
Thompson, Patrick (Norwich N)


McCrindle, Robert
Thorne, Neil


MacGregor, Rt Hon John
Thornton, Malcolm


MacKay, Andrew (E Berkshire)
Townend, John (Bridlington)


Maclean, David
Tracey, Richard


McLoughlin, Patrick
Tredinnick, David


McNair-Wilson, Sir Michael
Twinn, Dr Ian


McNair-Wilson, Sir Patrick
Viggers, Peter


Madel, David
Waddington, Rt Hon David


Major, Rt Hon John
Walden, George


Malins, Humfrey
Walker, Bill (T'side North)


Mans, Keith
Ward, John


Maples, John
Warren, Kenneth


Marland, Paul
Watts, John


Marshall, John (Hendon S)
Wells, Bowen






Wheeler, Sir John
Woodcock, Dr. Mike


Widdecombe, Ann
Yeo, Tim


Wiggin, Jerry
Young, Sir George (Acton)


Wilkinson, John



Wilshire, David
Tellers for the Noes:


Winterton, Mrs Ann
Mr. John M. Taylor and


Winterton, Nicholas
Mr. Tom Sackville.


Wood, Timothy

Question accordingly negatived.

New clause 3

ADDITIONAL RELIEF FOR LDC DEBT

'After section 88C of the Taxes Act 1988 inserted by Section 66 above there shall be inserted the following section:
88D additional relief for overseas Government debt.

(1) Where in relation to a debt to which section 88A(2) above applies, a company has included a provision in its accounts for any accounting period ending on or after 20th March 1990 which exceeds the aggregate amount which has a been deducted under section 74(j) above in relation to that debt for that and any previous accounting period, then it shall be entitled to additional relief under subsection (2) below subject to the clawback provided for by subsection (3) below.
(2) The additional relief shall be a deduction from profits chargeable to corporation tax for that accounting period equal to the difference between the aggregate amount mentioned in subsection (1) above and the lesser of

(a) the provision mentioned in subsection (1) above and
(b) the maximum provision which would have been made in relation to the debt had the company followed the recommendations contained in the Bank of England's guidelines for overseas debt provisioning in force at the end of that accounting period;

and for the purposes of subsection (1) above any relief given by virtue of this subsection shall be regarded as an amount deducted under section 74(j) above.
(3) The additional relief granted by subsection (2) above shall be withdrawn to the extent that, at a date three years from the end of that accounting period the company has not made a relevant release of the debt; and an assessment made to give effect to this subsection (or subsection (5) below) may be made at any time up to six years after that date.
(4) For the purpose of subsection (3) above, a relevant release means

(a) a release of the debt in favour of the Creditor Overseas State Authority for no consideration, or
(b) a disposal of the debt to the Overseas State Authority for a consideration equal to or less than its book value at the end of that accounting period, or
(c) a disposal of the debt by the company under a development plan or an environmental protection plan approved by the Treasury;

and the Treasury shall be empowered by this subsection to issue regulations demonstrating the criteria which it will use in deciding whether or not to approve under this subsection a development plan or environmental protection plan submitted to it for approval.
(5) Nothing in subsections (1) to (4) above shall cause the aggregate profits charged to corportion tax of any person for the accounting period in question, and all previous accounting periods in relation to which he was chargeable to corporation tax, to exceed those which would have been so charged had this section never been enacted; and this section shall have no effect to the extent that it would otherwise cause such excess to be charged to corporation tax.".'.—[Mr. Boateng.]

Brought up, and read the First time.

Mr. Paul Boateng: I beg to move, That

the clause be read a Second time.
New clause 3 is a modest measure, made all the more so by the restrictions of the Ways and Means resolution. However, its principle is important. It is introduced against a backcloth of crisis because of growing poverty in the developing world. There is a debt crisis that threatens to make that poverty even worse, and that will impact adversely upon Britain's banking system.
One in every five of the world's population has less than a dollar a day on which to live. More than 1 billion people—about a third of the developing world's population—are living on less than $370—£206—a year. The problem of poverty has been ably and comprehensively recorded in a recent report on world development by the World bank. It studies the last decade, which it considers to be a lost decade because of the opportunities that presented themselves to deal with the problems of poverty, but which were not taken or were squandered. Even more than a lost decade, it was a decade of despair, especially for the children upon whom poverty impacts adversely as it reduces their opportunity to achieve even basic standards of education. It was a decade of despair for the farmers, especially the single crop and subsistence farmers who found the whole basis of their agricultural economy undermined. It was a decade of despair for the women of the third world whose backs have borne the greatest brunt of debt and poverty.
Against that backcloth, the measures are meagre. Nevertheless, they are important because it is vital that there is a reduction in debt and that we recognise the contribution that the commercial banking sector can make in that process. Commercial banks play a disproportionate role in the net transfer of resources. Debts to banks, including guarantee export credits, represent 40 to 45 per cent. of the total debt of the debt-burdened countries. In 1988, £28 billion of their £30 billion net transfer to creditors was on transactions with commercial banks. It is clear from those figures that a reduction in net transfers to commercial banks is critical if we are to alleviate the debt burden. Even with that reduction, there is unlikely to be any substantial gains in that area.
The new clause seeks to offer banks more relief than that proposed in the Bill. However, the relief would not be unconditional; it would not be just a handout. It would be clawed back if, within three years of the accounting period in which the relief is claimed, it had not been given by way of reduction in indebtedness—either through the sale, at a loss, of the debt to the debtor country, or a swap that had environmental or development gain. That must be done within three years or the relief is clawed back, with interest.
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This modest measure is an incentive to the commercial banks to take their obligations seriously. It is commercially desirable to the banks, but there is also a moral obligation on them. It is important that the banks see their responsibilities as a matter not simply of commerce but of common morality. The Opposition are bound to say—I do not think that they are entirely alone in this—that there was something distinctly unseemly about the paean of special pleading in the Grand Committee Room by several Conservative Members on behalf of the banks. They addressed us at great length about the hardships experienced by the banks. It was a bit rich that their cry should drown the cry of the dispossessed


and the deserted of the world. Such pleas are a bit much from Conservative Members who come along with their carpetbags loaded with dosh while people in the developing world have to live on a dollar a day.
One in five people in the world has to live on a dollar a day—a shaming statistic, as hon. Members would agree. It should be possible to devise a programme of aid and assistance that is not limited to reducing indebtedness but is geared towards providing not just a safety net but a trampoline by which it will be possible for the developing world to bring itself up. The issue relates to the obligations not simply of aid donors but of aid recipients to ensure that the aid is not misused and abused. All too often over the past decade aid has been misplaced by us donors then misused by the regimes and Governments of the recipient countries. The poor have not had the advantages of development, and medium and long-term gains in those countries have not been made possible.
The new clause should not be seen as an end in itself; it is but a faltering step in the right direction. I wish to set it in the context of the Brady initiative. That initiative made a truly faltering start in addressing the issues, the magnitude of which we now fully understand. That faltering start was highlighted in the recent report by the Treasury and Civil Service Select Committee, which concluded that the Brady initiative
will be partial in its effect; and in the case of those countries which have adopted a Brady package its impact will be modest. The Brady initiative is not likely to provide a solution to the problems of the middle income debtors as a whole.
I do not think that any hon. Member could find fault with that conclusion. The United States Treasury Secretary, Mr. Brady, said that creditor Governments should consider how to reduce regulatory accounting or tax impediments to debt reduction where they exist. The new clause would reduce one such impediment and as such is commendable. We hope that the Government will find it in their heart to take it on board, and we commend it to them with that in mind.
The Brady initiative is weak in terms of its lack of ambition. It aims to reduce bank debts by some 20 per cent. The former vice-president of the World bank, David Knox, argued that we should try to cut the Latin American debt service to private creditors by 70 to 80 per cent. That shows the scale of the Brady initiative. A wider study group was chaired by the former managing director of the International Monetary Fund—not a body known in the developing world for its liberality or for its breadth of understanding of the impact of its strictures on debtor countries.
I am obliged to my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) for helping me to pronounce the name of that former managing director, Dr. Witteveen—they are very communautaire in Islington; the Dutch trips off the tongue. We in north-west London must learn from them. Dr. Witteveen correctly said that we should take 50 per cent. as a starting point for bank debt service reduction by highly indebted countries. I note that the Chief Secretary is waiting to demonstrate his linguistic ability. No doubt there are plenty of authorities upon whom he can rely.
The number of authorities that support the Government's approach on this issue is limited, if not non-existent. Who knows? Perhaps some can be dredged up from somewhere. Perhaps a family friend will help—but we must not trespass into family grief. We look

forward to hearing what the Economic Secretary has to say because this is an issue that requires urgent solutions. There are no easy solutions, and we do not pretend that there are. This matter requires us to go beyond sentiment to strategy, but we require some strategy if we are to deal with the problems of indebtedness.
The "World Development Report" was clear about the importance of addressing the issue of debt in relation to poverty because it is a prerequisite and a precursor to a successful arrival at a position from which it is possible to address the issue of poverty in the developing world, to deal with the issue of debt and to relieve some of the burden that currently encumbers those countries. If the necessary domestic policies—which are recommended by the World bank—to maximise the best available resource of those countries, their labour, are linked to social policies and to welfare policies that are focused on the needs of those most in need in the countries in question, that in itself is a welcome development. I am sure that hon. Members will agree with the thinking of the World bank on this issue.
Before one is able to address those domestic concerns, the international context of indebtedness must be got right. That is the conclusion of the "World Development Report" and it is worth considering in full. The report concludes:
Many low-income countries—especially but not exclusively in Sub-Saharan Africa—find themselves with daunting debt and debt service burdens at a time when they need to invest more (in order to improve their long-term prospects) and, simultaneously, to increase the consumption of large numbers of people in poverty. Further efforts by the international community will be needed to reduce their debts and to increase concessional assistance to them. These efforts should be conditional on appropriate policy reform in the countries concerned. Aid and debt relief will be to no avail if appropriate policies are not in place.
That report puts the issue of debt clearly in perspective. The new clause addresses that issue in a way that will effectively suspend the operation of new clause 88B and will reapply the old law, although only temporarily. If in the three years after relief has been granted the debt has not been released completely, sold at a loss to the creditor state or disposed of under an approved development plan or under an environmental protection plan, the additional relief is withdrawn and new clause 88B comes back into operation. That is secured by new clause 88D(3). Our proposal is more modest than we would want and the Ways and Means resolution weighed especially heavily on us in this respect. However, the new clause is a start and we have to begin somewhere. As a start, we commend it to the House.

Mr. James Wallace: We welcome the new clause. The hon. Member for Brent, South (Mr. Boateng) did not make any great claims about how radical the effect of the new clause would be. However, it pushes the modest provision that the Government have introduced in the Bill a step further in the right direction. The hon. Member for Brent, South said that the new clause and the Government's proposal are consistent with the Brady initiative, although he is right to point out that, as the Select Committee on the Treasury and Civil Service concluded, the Brady initiative
will be partial in its effect; and in the case of those countries which have adopted a Brady package its impact will be modest.
Given the scale of the debt crisis facing many developing countries, any package is to be welcomed


inasmuch as it helps to relieve them of debt. However, we should be under no illusion about the amount that still needs to be done if the heavy burden of debt is to be removed and if, in removing it, we are to allow those countries the opportunity to go forward and to seek and undertake development with far greater confidence and ability.
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The hon. Member for Brent, South referred to the background against which the new clause is moved and to the need to relieve many nations of their debt. It is important that we remind ourselves of the scale and consequences of that debt. The debt crisis has ensured that over many years many of the debtor states have been denied the resources that they need to build sustained and sustainable economic growth. As a result, many of the basic services of food, shelter, health, education and employment have been denied to the people.
The hon. Gentleman made the valid point that much of the debt that has been incurred has not gone to relieve the burden of the plight of the poorest people in those countries. They have continued to suffer and the prospect of any relief of their suffering has been seriously hindered by an ever-growing debt problem.
"The State of the World's Children Report 1989" states that average incomes in Africa and Latin America have fallen by 10 per cent. to 25 per cent. in recent years, that health spending has been reduced by half, that education spending has been reduced by 25 per cent. in the 37 poorest nations and that in over half the 103 developing nations there has been a 20 per cent. drop in the number of children attending school in the six to 11-year-old age bracket. Those are startling figures and should bring home to us the nature of the problem and its human dimension. They should also encourage us to an even more dramatic response than we have had in the Bill or in the new clause.
It is also important to recognise, as we are now all environmentalists, the effect that debt burdens have had on the environment. That has resulted in the marginalisation of small farmers, which has been one of the causes of the slash-and-burn exploitation of forests and of other desperate and environmentally destructive survival strategies. Apart from the need to improve the lot of many of our fellow human beings, there is also an urgent need to take steps to remove the need for many people in these countries to take action that will be environmentally damaging.
The hon. Member for Brent, South did not make great claims for the new clause. However, much will depend on the Bank of England guideline. My reading of the new clause—I am subject to correction if I am wrong—is that if the guideline for a country does not increase by more than 15 per cent. over three years, nothing in the new clause would give any further relief above that already provided under clause 74. However, the incentive for packages to be implemented which is implicit in the new clause is welcome; the matter is not left to chance. A degree of urgency is instilled into the measures and that is especially welcome, as is the definition of what releasing a debt amounts to. That is helpful and widens the original definition.
This gives us an opportunity to ask whether the amendment is a big step forward. The answer is that it is

not. I suspect that some of its deficiencies are a fact of life because there are things that Opposition parties are unable to do in the context of the Finance Bill. There are restrictions which prevent Opposition Front-Bench Members from taking steps which are as dramatic as they would like. It also gives us an opportunity to ask in which direction the Government wish to move in future Finance Bills to extend the provisions that they have introduced. Is this to be the sum and substance of their contribution towards encouraging banks to write off or sell back debt, or can we look forward to further initiatives in future Finance Bills, particularly if the measures introduced in this Bill are seen not to be sufficient? I should be interested to hear from the Economic Secretary what proposals he has to monitor the use made of the current clause and what further proposals he might have to extend it.
One way to improve the new clause and make it more effective would be to entitle banks to full relief on any level of provision and subject that to clawback. That may have been impossible for the Opposition to propose, but it would be much more effective in trying to achieve the objectives which I am sure that all hon. Members wish to achieve. The debate will have been worth while if the Treasury Bench will say that this is only a first step towards taking much more drastic and radical action to alleviate a global problem affecting our fellow citizens. Although the provisions are modest, they are to be welcomed.

Mr. Mike Watson: The scale of the debt problem relating to developing countries should not be underestimated. No one participating in this debate or in the Committee has underestimated the problem, but there are differences in the way people feel that it should be addressed. The World bank classifies 46 of the 111 countries reporting to it as "severely indebted". Those countries owed $675 billion out of a total developing country debt of about twice that figure. They are mostly to be found in the African continent, mainly in the sub-Saharan region. Relative to their exports and economic activity, the total debts of low-income debtors are even larger than those of the developing world's largest debtors such as Mexico and Brazil. Most of those countries have a debt service to export ratio of at least 25 per cent., which goes some way towards explaining the fact that many of the aid agencies viewed the 1980s as a decade of negative development for those countries.
For some countries, the debt repayment and the austerity measures designed to facilitate that repayment have had such serious economic consequences that social and political unrest has resulted. There have been riots in countries such as Algeria, Venezuela and Zambia, which are countries that we are supposed to be assisting. The austerity demanded by the so-called middle-income countries was no more effective. Brazil's external debt in 1973 was $9 billion. Between that time and 1985 Brazil paid $145 billion as debt service while a total of $121 entered the country as new loans. That means that in that period there was a net outflow of $24 billion, yet the total debt still rose to $95 billion by 1985. If that is an example of the developed world helping the developing world, one can forgive the average Brazilian for saying, "You can keep your money—if that is the way the International Monetary Fund and the World bank assist us, heaven help us if they ever try to undermine our economy."
Brazil is the sixth largest exporter of foodstuffs, yet 30 million of its people subsist on fewer than 1,600 calories a day—600 below what is regarded as the basic minimum by the World Health Organisation. There is no shortage of examples of other countries whose economies are in desperate straits and are being driven further into the mire by the avarice and heartlessness of the commercial banks throughout the developed world, including banks in this country.
Between 1982 and 1988 there was a net transfer of resources from debt-burdened countries to the banks of $144 billion. That is a disgrace and a dereliction of the duty by the developed countries to their less fortunate counterparts. The pendulum must begin to swing back towards the third world countries. Banks now have provisions worth in excess of 50 per cent. of their third world loans and can afford substantial debt reduction without incurring significant additional losses.
The Brady initiative of 1989, referred to by my hon. Friend the Member for Brent, South (Mr. Boateng), recognised that debt reduction is now essential. However, many banks still resist the temptation to reduce their debts. It is clear that neither Brady nor the 1980 Toronto agreement, under which western countries cancelled a third of debt servicing costs over 14 years—that was aimed at the more seriously indebted countries—eliminated the negative net transfer of resources to which I have referred.
World problems require world solutions. The Government could and should be doing more to encourage our banks to reduce or sell their debts to the developing countries. Clause 66 gives tax advantages to banks when a debt is sold back to the debtor country. That is welcome as far as it goes, but it does not go far enough. In Committee the then Financial Secretary rejected the arguments advanced by my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) relating to the widening of the scope of relief to cover environmental swaps. It is right that that issue should be the subject of further consideration now.
These arrangements are becoming a major feature of the method by which commercial banks and voluntary aid organisations use debt reduction to assist indebted countries. The bank donates its loan expenditure to a charity—the Midland bank did this with UNICEF in the Sudan two years ago—and the charity then arranges with the developing country to provide in local currency an equivalent amount which is then used for approved development products. That is a sensible method of addressing a debt burden which is often a millstone around the neck of developing countries. It turns such a problem into a positive advantage. It is relieved of the debt while guaranteeing funding of a project that enhances the quality of life for at least some of its people. Surely that must be welcomed.
The Government should recognise that and be prepared to offer tax incentives to British banks to encourage them to follow the example of the Midland bank. I am not so naive as to think that banks are in the business of philanthropy, but by using the corporation tax system they could be encouraged to sell back debts and become involved in meaningful debt disposal under a development or environmental protection plan.
In Committee the Financial Secretary gave what I and many of my hon. Friends felt was an unconvincing response on this issue. I hope that the Economic Secretary, who I am sure will soon become the Chief Secretary's

successor, when he has had time to consider the matter further will feel it within his power to presage that appointment by appreciating the value of the provisions of the new clause and agreeing to add it to the Bill.

The Economic Secretary to the Treasury (Mr. Richard Ryder): I am not surprised that this debate has ranged beyond the immediate tax provisions of new clause 3 Hon. Members have raised a number of important related points.

Mr. Campbell-Savours: That could not have happened; the occupant of the Chair would have intervened.

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Mr. Ryder: The hon. Gentleman says from a sedentary position that that could not have happened because the occupant of the Chair would have intervened. I think, Madam Deputy Speaker, that Opposition Members were illustrating their arguments by providing examples that were not directly concerned with the tax provisions of new clause 3. Certainly those of us who were here enjoyed the debate and learned a great deal from what hon. Members said.
On the United Kingdom's general strategy on third world debt, I cannot agree with those who argue that our approach is not working or that we are not making available sufficient resources. Our approach has been to give our support to an internationally agreed strategy which was reaffirmed by the G7 Heads of State at Houston earlier this month. The Government believe that the strategy that we and our international partners have adopted offers by far the best way forward.
Hon. Members have referred to the provision of official resources. These have been significantly increased and will be increased again when the International Monetary Fund quota increase comes into force. The United Kingdom is contributing significantly.
I accept that new clause 3, to which the hon. Member for Brent, South (Mr. Boateng) spoke, seeks to encourage debt reduction and debt forgiveness and that it is well intended. But clause 74—together with existing reliefs for charitable donations—already covers significant ground.
The relief proposals in the new clause could be very costly, and I shall refer to that in a moment. It depends on what exactly is meant by giving extra relief up to the maximum provision recommended by the Bank of England's guidelines, as those guidelines provide not a precise level for each country but only broad bands. If the proposal means that banks could claim relief up to the top of the band within which any particular country fell, the extra relief in 1991–92 could cost up to £350 million. That is partly because it would override the phasing arrangements on increases in provisions which we have introduced and partly because it would allow tax relief up to the top of the Bank of England's bands rather than—as under the procedures that we are introducing—to an intermediate point within them. That would completely undermine one of the main objectives of the Government's proposals which is to keep the costs to the Exchequer of doubtful sovereign debt within bounds.
The Opposition may feel that that money would be well spent if it went to reducing the debt of third world countries but, effectively, under their proposals, banks would get such loans whether or not they engaged in debt reduction. Under our proposals, they will get immediate


relief for any loss on disposals of debt back to the borrower Government. The tax advantage to a bank that took part in a debt reduction scheme—over a bank that did not—would be just the same under our proposals as under the Opposition's proposals. The only difference would be that, under the new clause, there would have been a substantial interest-free loan by the Government to the banks.
Moreover, during the three-year period, banks would be discouraged from selling their debt on the secondary market. Any fall in sales as a result would hit those debtor countries that are able to buy back their debt, especially those that have acquired it unofficially on the secondary market.

Mr. Campbell-Savours: Before Ministers slip into producing mythical figures in this debate, as they did in the previous debate, may I ask the Economic Secretary this? He referred to a figure of up to £350 million. Will he give us the bottom-end figure?

Mr. Ryder: I am prepared to say that the relief would cost about £350 million and that if it cost less, it would not cost much less. We are talking about a significant sum. That much has been acknowledged throughout our proceedings on the Bill: we are dealing with very large sums. Some of my hon. Friends criticised my right hon. Friend the Chancellor for taking more than he should have done in his Budget on 20 March. No one is quarrelling about the fact that the sums that have been calculated and agreed among a wide variety of organisations are accurate, and those are the sums on which we have been working.
The Government have greatly improved the provisions for tax relief for company donations to charities. Banks that wish to assist development and environmental charities can take advantage of the provisions. I recognise that gifts in kind are not deductible, but it is possible for banks to arrange a transfer of money which will achieve the same effect and, provided that the amounts do not exceed the allowable limits, there will be tax relief. I am happy to repeat the assurance that my right hon. Friend the Secretary of State for Trade and Industry—I look forward to reading this in Hansard tomorrow—gave in Committee that if charitable relinquishment of debt starts to run up against the 3 per cent. limit of dividends paid in the year, we shall, of course re-examine the matter.
The resolution of international debt problems is inevitably a long-term matter. But we have come a long way since the crisis broke in 1982. It is significant that debt levels have stabilised. For the most heavily indebted middle-income countries—the so-called Baker 15—the total debt stock has fallen about 10 per cent. from its peak. It is also important to recognise that the systemic risk to the banking system has been averted. For example, the exposure of United States banks to least-developed countries has fallen from about 200 per cent. of their capital in 1982 to about 70 per cent. in 1988. For British banks, the figure has fallen from around 150 per cent. to 50 per cent. in the same period.
Let me refer to this country's record on debt strategy. I remind the House that we fully supported the strengthening of the debt strategy agreed by the IMF and World bank boards just over a year ago. The Brady plan, which has been referred to, has encouraged the process of

debt reduction by the commercial banks. Progress has already been made. In particular, recent commercial bank agreements with Chile, Costa Rica, Mexico, Morocco, the Philippines and Venezuela involve significant debt and debt service reductions. A combination of debtor reform efforts and commercial bank debt reduction has helped improve confidence in debtor economies, perhaps most noticeably in Mexico where there has been some welcome return of flight capital.
Among middle-income countries, the bulk of whose debt is owed to the commercial banks, it is primarily for the debtors and their commercial creditors to resolve debt problems. I cannot accept that the taxpayer should be expected to bail out the banks. Among the poorest countries, whose debts are primarily to official creditors, Governments have a more prominent role. That is why the Government have paid a good deal of attention to the needs of such countries. The House will be familiar with what has been done. My right hon. Friend the Member for Blaby (Mr. Lawson), the previous Chancellor, launched an initiative which led to the adoption of Toronto terms, alluded to by the hon. Member for Glasgow, Central (Mr. Watson), at the June 1988 summit. This recognised the need for relief on official debts for the poorest countries in sub-Saharan Africa. I am sure that we are all pleased that the Paris club has been implementing this initiative and that already about 18 countries have benefited from concessional rescheduling covering over $5 billion of debt. Additionally, the United Kingdom has written off nearly £1 billion of old aid loans and all our new aid to low-income countries is provided on grant terms. Some 70 per cent. of our aid goes to the world's 50 poorest countries and the recent Houston summit encouraged the Paris club to review the implementation of the existing options that apply to the poorest countries. It is worth quoting from paragraph 55 of the Houston communiqué:
Significant progress has been made during the past year under the strengthened debt strategy, which has renewed the resolve in a number of debtor countries to continue economic reforms essential to future growth.
Of course, private sector investment is also important, and in that regard the United Kingdom's record in the developing countries is of a high order. Only the United States and Japan are greater sources of foreign direct investment than we are. Nearly $10 billion of United Kingdom net direct investment went to developing countries between 1985 and 1988. Of course we try to encourage countries to remove restrictions on foreign direct investment, and many are now doing so.
The World bank has become increasingly environmentally sensitive in its project programme design, and the United Kingdom has encouraged and welcomed that development, playing a significant part in board discussions and initiating some time ago the desire for the World bank to become more environmentally sensitive. We are happy for commercial banks to engage in debt-for-nature swaps if they so choose. However, we think that official aid is better and more effectively used for directly financing environmental projects than for official participation in debt-for-nature swaps.
We must all be encouraged by the progress made in some countries with severe debt problems in getting to grips with a more market-oriented approach to economic policy-making. An example of that is the trade liberalisation in Mexico and Venezuela. Several countries, such as Brazil, Argentina and Mexico, are implementing


privatisation programmes. As in eastern Europe, there has been a growing recognition of the failure of centrist policies and the dangers of excessive fiscal deficits. If the shift towards more market-oriented reforms can be sustained and extended, many of those countries will be more likely to achieve the growth objectives for which they have been searching. No one understands that better than the majority of the politicians now running debtor countries, many of whom come to London for talks.
The hon. Member for Glasgow, Central referred to Brazil. As it happens, Brazil's Finance Minister was in London yesterday, and it was clear from what she said that Brazil has made major strides towards becoming a more market-oriented economy along the lines that we have been discussing tonight.

Mr. Nigel Forman: I apologise to the House if I have not been here for all the Economic Secretary's remarks. From his glancing reference to eastern Europe, I gather that he is concerned about the possibility that, now that there has been a change of regime in those countries and they are following more sensible market-led policies, they may be burdened with debt from the previous regime that ran their economies in an unsatisfactory way. Can the Minister offer any hope of a degree of "forgiveness" for the debts that countries such as Poland incurred under the previous regime?

Mr. Ryder: My hon. Friend knows that we are doing a great deal to help Poland, which is one of the most severely indebted countries in the world. Although I have not visited Poland, I think that my hon. Friend has, as have some of my ministerial colleagues, who came back and said that the Poles recognised that the advice with which we have been able to provide the Polish Government on market-oriented reforms and privatisation is as valuable as any economic advice that they have received.
As my hon. Friend knows, the International Monetary Fund has been exceptionally helpful to Poland. The British Government play a full part in the councils of the IMF and the World bank, and will continue to do so. If my hon. Friend reads the communiqué of the Houston summit of 11 July 1990, he will find that there is no such commitment to Poland along the lines that he suggested, but paragraph 36 says:
We commend the work done by the Commission of the European Communities on the coordination by the Group of 24 … of assistance to Poland and Hungary inaugurated at the Summit … which has made a significant contribution to helping these countries lay the foundation for self-sustaining growth based on market principles. We welcome the decision of the Group of 24 to enlarge the coordination of assistance to other emerging democracies in Central and Eastern Europe, including Yugoslavia.
I understand why the Opposition have tabled the new clause, but I do not think that we can support it. It would be very costly—

Mr. Campbell-Savours: I do not think that the Minister replied to the important question asked by the hon. Member for Carshalton and Wallington (Mr. Forman). The hon. Member asked about debt forgiveness, and the Minister referred to the Houston agreement and what was decided there. Why does not he answer the question

directly? Why is it impractical to write off a part of Poland's debt that was incurred under a Government whom some might regard as fascist?

Mr. Ryder: As the hon. Gentleman knows, Poland is not the only country in eastern Europe—although it is by far the worst affected—to have been misruled by a communist regime, to the extent that it owes money to other people. It is our aim to ensure that all the countries of eastern Europe are treated fairly and in the same way. It would not be right to select one country for special treatment. That much was recognised by other countries in the Community, and was acknowledged at the economic summit meeting in Houston only last week.

Mr. Watson: The Minister referred to the need for a market-led economy to assist countries with vast foreign debts. He mentioned Brazil, as I did earlier. Brazil is massively in debt: I am not aware that it has ever—certainly in recent times—been anything other than a market-led economy. However, that has not stopped it having a low standard of living for the vast majority of its people, and building up a massive debt. Does the Minister agree that as long as Brazil—the sixth largest food exporter in the world—has 30 million people surviving on 1,600 calories a day, it is not just a question of a market-led economy, but a question of the debt that it is obliged to service and live with like a millstone round the neck?

Mr. Ryder: I take the hon. Gentleman's views seriously. During my discussions with the Brazilian Minister of Finance only yesterday, she told me that the new policies being followed by the Brazilian Government along a market-oriented path were encouraging more foreign investment and helping to put that economy on to a surer footing than it had been on in the past. That is true of many other countries in Latin and South America, which are following precisely the same policies.
The new clause could prove costly; I have put the figure at £350 million. I do not think that it will give the banks any new incentive to forgive debt, but it would have an adverse effect on the operation of clause 74, which already increases the relative attraction of debt reduction schemes by not phasing losses made on disposals back to the original borrower. We have pointed out for some time the scope for voluntary commercial debt reduction. The Government welcome the growing menu of options for the banks and the progress made under the strengthened debt strategy. Clause 74 already provides an adequate incentive to take part in debt reduction schemes, and I do not think that there is any need for the new clause.
During his speech, the hon. Member for Brent, South referred to Dr. Witteveen, and he saw a broad smile cross my face. Perhaps he thought that I was smiling because he had mispronounced "Witteveen". I do not know how it is pronounced, but Dr. Witteveen is the distinguished person responsible for drawing up the IMF plan when the Labour Government went broke in the 1970s. The hon. Member for Brent, South spoke warmly about some remarks of Dr. Witteveen. I wonder whether the hon. Gentleman passed such kind remarks about Dr. Witteveen when he drew up the IMF agreement for Britain in 1976. I say that in a light spirit. I am sure that the hon. Gentleman—my favourite designer Jacobin from Brent—who has the last word in the debate, will explain that he supported Dr. Witteveen in 1976.

Mr. Bowen Wells: Is not it true that the British system of taxation relief is more generous than that of any other country and that our banks have provided against third world debt more extensively and at greater speed certainly than the United States of America banks have been able under their legislative regime, and more quickly than those under European legislation? Therefore, it seems strange that the new clause should be advanced on this Finance Bill.

Mr. Ryder: There has been a great deal of criticism of British banks by some—not all—Opposition Members, and I am certainly more than happy to confirm what my hon. Friend says. In view of the argument that he has just deployed, I am surprised that British banks come in for the amount of criticism that they often get from some Opposition Members. It is a pity that that is so. Most British banks are extremely keen to help developing countries. After all, they have lent a lot of money to those countries and they want to do everything that they can to get it paid back. It would be against their better interests to do anything else.
I hope that the hon. Member for Brent, South will feel able to withdraw the motion. However, I do not expect that he will. This is my final word in the passage of the Bill. It has been great fun to speak opposite the Labour Front Bench team. I much look forward to the Third Reading speech of the hon. Member for Newcastle upon Tyne, East (Mr. Brown). I have heard his Third Reading speeches before. They are a turn that should not be missed. I hope that all my hon. Friends will rush into the Chamber when they see his name on the monitors.

Mr. Boateng: I should not want to be churlish after the valedicatory remarks of the Economic Secretary as we reach the end of the passage of the Bill. The Economic Secretary should be able—I am sure that he is—in relation to banks and their approach to third-world debt, to make a distinction between debt provision and debt relief. The act of provision is of no comfort to the developing world. The act of relief is of considerable comfort. We are seeking to encourage the banks to move from provision to relief. It is as simple as that. This modest new clause pushes, prods and encourages the banks along that route. Given the chance, several Opposition Members would prefer a little more stick and a little less carrot, but we recognise the strictures of the Ways and Means resolution.
As for the good Dr. Witteveen, I am now aware of the good doctor's somewhat chequered past, but it is a past in which he played a role in the economic history of our country. We have moved on. I do not envisage that his services will ever be required again by a Labour Government, and I do not intend to hold against him the fact that his services were required in the past. He is now a repository of considerable wisdom on the issue.
I commend to the current Economic Secretary more of what Dr. Witteveen had to say about the proposal, which we developed upon the basis of work done by Dr. Stephanie Griffiths-Jones of the institute of development studies at the University of Sussex. On her work and, therefore, the new clause, Dr. Witteveen said:
Dr Griffiths-Jones has correctly pointed out that in most European countries provisions against country debt are tax deductible, so that no fiscal incentive remains for banks to actually reduce the debt of these countries. Her proposal to limit the tax deductibility to banks that participate in debt reduction plans seems quite reasonable to me. It seems a somewhat anomalous situation that in most European

countries commercial banks have now built up provisions of more than 50% of their total country debt, which in many cases have been deducted from their taxable profits, while in the Brady Plan debt reductions of much smaller percentages are being proposed.
That goes directly to the heart of the new clause and approves it in circumstances in which the current level of provision is such as to warrant a measure of this nature.
The four major United Kingdom banks—Lloyds, Midland, NatWest and Barclays—made provision of £4,290 million in the past financial year. That is 55 per cent. of their cumulative provision in recent years. Ultimately those provisions would attract—it goes precisely to the point that was made by the hon. Member for Hertford and Stortford (Mr. Wells)—£1,501 million in tax relief, which is roughly equivalent to one year's aid budget. Those figures are astronomic. The new clause would address the challenge that they present to convert some of that provision into relief for countries most desperately in need.
At times during the Economic Secretary's speech there was a degree of complacency about the Government's record on overseas aid and development. It was a particularly unhelpful degree of complacency. In real terms we are donating less now than we did under the previous Labour Government. Let me reiterate the pledge that has been made by the Opposition time and again. We shall move, as a matter of priority, towards fulfilling the United Nations' objective. We shall not rest until 0.7 per cent. of our gross national product is devoted to overseas aid and development. That is the United Nations' objective, and we readily embrace it. It is one which, once again, has been commended by the World bank in terms that are directly in opposition to the implications of the speech of the Economic Secretary when he suggested that all that was really required—no, perhaps that is not entirely fair to the hon. Gentleman, when he suggested that what was required was largely that the developing world should embrace the rigours of the market and have a shot or two of privatisation.
7.30 pm
I am afraid that life is not as simple as that. We have learned in our own country that life is not as simple as that. Life is certainly not that simple in the developing world, which is precisely why the World bank's recent report made it clear that a two-pronged approach is now required. Yes, it should recognise the importance of restructuring the economies of the developing countries, but it should also recognise the importance of cushioning the shock of that restructuring with welfare plans that go hand in hand with that process. That makes sense. That is the pattern of development aid that the Opposition are promoting. We look to the Government to respond to the World bank's report. We pledge ourselves to a target of 0.7 per cent. of gross national product because we recognise that if that were done, in conjunction with the rest of the developed world, as the World bank has asked us to do we would together have increased the flow of assistance to $144 billion by the year 2000 from its current shameful level of $51 billion. To do less is not good enough.
The Opposition are not complacent and we therefore intend to push our new clause to a Division.

Question put, That the clause be read a Second time:—

The House divided: Ayes 189, Noes 244.

Division No. 298]
[7.31 pm


AYES


Adams, Allen (Paisley N)
Garrett, Ted (Wallsend)


Allen, Graham
George, Bruce


Alton, David
Godman, Dr Norman A.


Anderson, Donald
Gordon, Mildred


Archer, Rt Hon Peter
Graham, Thomas


Armstrong, Hilary
Grant, Bernie (Tottenham)


Ashdown, Rt Hon Paddy
Griffiths, Nigel (Edinburgh S)


Ashley, Rt Hon Jack
Griffiths, Win (Bridgend)


Ashton, Joe
Hardy, Peter


Barnes, Harry (Derbyshire NE)
Harman, Ms Harriet


Barron, Kevin
Hattersley, Rt Hon Roy


Beckett, Margaret
Heal, Mrs Sylvia


Beith, A. J.
Healey, Rt Hon Denis


Bell, Stuart
Henderson, Doug


Benn, Rt Hon Tony
Hinchliffe, David


Bennett, A. F. (D'nt'n &amp; R'dish)
Hogg, N. (C'nauld &amp; Kilsyth)


Bermingham, Gerald
Home Robertson, John


Bidwell, Sydney
Hood, Jimmy


Boateng, Paul
Howarth, George (Knowsley N)


Boyes, Roland
Howell, Rt Hon D. (S'heath)


Bradley, Keith
Howells, Geraint


Bray, Dr Jeremy
Hoyle, Doug


Brown, Gordon (D'mline E)
Hughes, John (Coventry NE)


Brown, Nicholas (Newcastle E)
Hughes, Robert (Aberdeen N)


Bruce, Malcolm (Gordon)
Hughes, Roy (Newport E)


Buckley, George J.
Hughes, Simon (Southwark)


Caborn, Richard
Jones, Barry (Alyn &amp; Deeside)


Callaghan, Jim
Jones, Ieuan (Ynys Môn)


Campbell, Menzies (Fife NE)
Jones, Martyn (Clwyd S W)


Campbell, Ron (Blyth Valley)
Lambie, David


Campbell-Savours, D. N.
Lamond, James


Canavan, Dennis
Leighton, Ron


Carlile, Alex (Mont'g)
Litherland, Robert


Carr, Michael
Livsey, Richard


Clark, Dr David (S Shields)
McAllion, John


Clarke, Tom (Monklands W)
McAvoy, Thomas


Clay, Bob
McCartney, Ian


Clelland, David
Macdonald, Calum A.


Clwyd, Mrs Ann
McFall, John


Cohen, Harry
McKay, Allen (Barnsley West)


Cook, Frank (Stockton N)
McKelvey, William


Corbett, Robin
McLeish, Henry


Cousins, Jim
Maclennan, Robert


Crowther, Stan
McNamara, Kevin


Cryer, Bob
McWilliam, John


Cummings, John
Madden, Max


Cunliffe, Lawrence
Mahon, Mrs Alice


Cunningham, Dr John
Marek, Dr John


Darling, Alistair
Marshall, David (Shettleston)


Davies, Rt Hon Denzil (Llanelli)
Marshall, Jim (Leicester S)


Davies, Ron (Caerphilly)
Martin, Michael J. (Springburn)


Davis, Terry (B'ham Hodge H'l)
Martlew, Eric


Dewar, Donald
Maxton, John


Dixon, Don
Meacher, Michael


Dobson, Frank
Michael, Alun


Doran, Frank
Michie, Bill (Sheffield Heeley)


Duffy, A. E. P.
Mitchell, Austin (G't Grimsby)


Dunnachie, Jimmy
Moonie, Dr Lewis


Dunwoody, Hon Mrs Gwyneth
Morgan, Rhodri


Eadie, Alexander
Morley, Elliot


Eastham, Ken
Morris, Rt Hon A. (W'shawe)


Evans, John (St Helens N)
Morris, Rt Hon J. (Aberavon)


Ewing, Harry (Falkirk E)
Mullin, Chris


Ewing, Mrs Margaret (Moray)
Murphy, Paul


Fatchett, Derek
Nellist, Dave


Faulds, Andrew
Oakes, Rt Hon Gordon


Field, Frank (Birkenhead)
O'Brien, William


Fields, Terry (L'pool B G'n)
Orme, Rt Hon Stanley


Fisher, Mark
Parry, Robert


Flannery, Martin
Patchett, Terry


Flynn, Paul
Pendry, Tom


Foot, Rt Hon Michael
Pike, Peter L.


Foster, Derek
Powell, Ray (Ogmore)


Foulkes, George
Primarolo, Dawn


Fyfe, Maria
Quin, Ms Joyce


Galloway, George
Radice, Giles


Garrett, John (Norwich South)
Randall, Stuart





Redmond, Martin
Taylor, Mrs Ann (Dewsbury)


Reid, Dr John
Thomas, Dr Dafydd Elis


Richardson, Jo
Turner, Dennis


Rogers, Allan
Vaz, Keith


Rooker, Jeff
Wallace, James


Ross, Ernie (Dundee W)
Wareing, Robert N.


Ruddock, Joan
Watson, Mike (Glasgow, C)


Sedgemore, Brian
Welsh, Michael (Doncaster N)


Sheldon, Rt Hon Robert
Wigley, Dafydd


Sillars, Jim
Williams, Alan W. (Carm'then)


Skinner, Dennis
Wilson, Brian


Smith, Andrew (Oxford E)
Winnick, David


Smith, C. (Isl'ton &amp; F'bury)
Wise, Mrs Audrey


Smith, J. P. (Vale of Glam)
Worthington, Tony


Snape, Peter
Young, David (Bolton SE)


Soley, Clive



Spearing, Nigel
Tellers for the Ayes:


Steinberg, Gerry
Mr. Frank Haynes and


Stott, Roger
Mrs. Llin Golding.


Straw, Jack





NOES


Alexander, Richard
Dover, Den


Alison, Rt Hon Michael
Dunn, Bob


Amos, Alan
Durant, Tony


Arnold, Jacques (Gravesham)
Eggar, Tim


Aspinwall, Jack
Evans, David (Welwyn Hatf'd)


Atkins, Robert
Evennett, David


Atkinson, David
Fairbairn, Sir Nicholas


Baker, Rt Hon K. (Mole Valley)
Fallon, Michael


Batiste, Spencer
Farr, Sir John


Beaumont-Dark, Anthony
Favell, Tony


Bellingham, Henry
Field, Barry (Isle of Wight)


Bendall, Vivian
Finsberg, Sir Geoffrey


Bennett, Nicholas (Pembroke)
Fishburn, John Dudley


Bevan, David Gilroy
Fookes, Dame Janet


Blackburn, Dr John G.
Forman, Nigel


Blaker, Rt Hon Sir Peter
Forth, Eric


Bonsor, Sir Nicholas
Fowler, Rt Hon Sir Norman


Boscawen, Hon Robert
Fox, Sir Marcus


Boswell, Tim
Franks, Cecil


Bowden, A (Brighton K'pto'n)
Freeman, Roger


Bowden, Gerald (Dulwich)
French, Douglas


Bowis, John
Fry, Peter


Boyson, Rt Hon Dr Sir Rhodes
Gale, Roger


Braine, Rt Hon Sir Bernard
Gardiner, George


Brandon-Bravo, Martin
Garel-Jones, Tristan


Bright, Graham
Gill, Christopher


Brown, Michael (Brigg &amp; Cl't's)
Glyn, Dr Sir Alan


Bruce, Ian (Dorset South)
Goodlad, Alastair


Buchanan-Smith, Rt Hon Alick
Goodson-Wickes, Dr Charles


Budgen, Nicholas
Gorman, Mrs Teresa


Burt, Alistair
Gow, Ian


Butcher, John
Grant, Sir Anthony (CambsSW)


Butler, Chris
Greenway, Harry (Ealing N)


Carlisle, John, (Luton N)
Greenway, John (Ryedale)


Carlisle, Kenneth (Lincoln)
Gregory, Conal


Carttiss, Michael
Griffiths, Peter (Portsmouth N)


Channon, Rt Hon Paul
Grist, Ian


Chapman, Sydney
Ground, Patrick


Chope, Christopher
Grylls, Michael


Clark, Hon Alan (Plym'th S'n)
Hague, William


Clark, Dr Michael (Rochford)
Hamilton, Neil (Tatton)


Clark, Sir W. (Croydon S)
Hanley, Jeremy


Clarke, Rt Hon K. (Rushcliffe)
Hannam, John


Colvin, Michael
Hargreaves, Ken (Hyndburn)


Conway, Derek
Harris, David


Coombs, Anthony (Wyre F'rest)
Haselhurst, Alan


Couchman, James
Hawkins, Christopher


Cran, James
Hayes, Jerry


Critchley, Julian
Hayhoe, Rt Hon Sir Barney


Currie, Mrs Edwina
Hayward, Robert


Curry, David
Heseltine, Rt Hon Michael


Davies, Q. (Stamf'd &amp; Spald'g)
Hicks, Mrs Maureen (Wolv' NE)


Davis, David (Boothferry)
Hicks, Robert (Cornwall SE)


Day, Stephen
Higgins, Rt Hon Terence L.


Devlin, Tim
Hill, James


Dicks, Terry
Hind, Kenneth


Dorrell, Stephen
Hogg, Hon Douglas (Gr'th'm)


Douglas-Hamilton, Lord James
Hordern, Sir Peter






Howard, Rt Hon Michael
Ridsdale, Sir Julian


Howell, Rt Hon David (G'dford)
Rifkind, Rt Hon Malcolm


Howell, Ralph (North Norfolk)
Roberts, Sir Wyn (Conwy)


Hughes, Robert G. (Harrow W)
Rossi, Sir Hugh


Hunter, Andrew
Rost, Peter


Irvine, Michael
Rowe, Andrew


Irving, Sir Charles
Rumbold, Mrs Angela


Jack, Michael
Ryder, Richard


Janman, Tim
Shaw, Sir Giles (Pudsey)


Jessel, Toby
Shaw, Sir Michael (Scarb')


Jones, Gwilym (Cardiff N)
Shelton, Sir William


Jones, Robert B (Herts W)
Shephard, Mrs G. (Norfolk SW)


Key, Robert
Shepherd, Colin (Hereford)


Kilfedder, James
Shepherd, Richard (Aldridge)


King, Roger (B'ham N'thfield)
Sims, Roger


Kirkhope, Timothy
Skeet, Sir Trevor


Knapman, Roger
Smith, Tim (Beaconsfield)


Knight Greg (Derby North)
Soames, Hon Nicholas


Knowles, Michael
Speller, Tony


Knox, David
Spicer, Sir Jim (Dorset W)


Lamont, Rt Hon Norman
Spicer, Michael (S Worcs)


Lang, Ian
Squire, Robin


Lawrence, Ivan
Stanbrook, Ivor


Lee, John (Pendle)
Stanley, Rt Hon Sir John


Leigh, Edward (Gainsbor'gh)
Steen, Anthony


Lester, Jim (Broxtowe)
Stern, Michael


Lightbown, David
Stevens, Lewis


Lilley, Peter
Stewart, Allan (Eastwood)


Lloyd, Sir Ian (Havant)
Stewart, Andy (Sherwood)


Lloyd, Peter (Fareham)
Stewart, Rt Hon Ian (Herts N)


Lord, Michael
Stradling Thomas, Sir John


McCrindle, Sir Robert
Sumberg, David


MacGregor, Rt Hon John
Summerson, Hugo


MacKay, Andrew (E Berkshire)
Taylor, Ian (Esher)


Maclean, David
Taylor, Teddy (S'end E)


McLoughlin, Patrick
Tebbit, Rt Hon Norman


McNair-Wilson, Sir Michael
Temple-Morris, Peter


McNair-Wilson, Sir Patrick
Thompson, D. (Calder Valley)


Madel, David
Thompson, Patrick (Norwich N)


Major, Rt Hon John
Thornton, Malcolm


Malins, Humfrey
Townend, John (Bridlington)


Mans, Keith
Tracey, Richard


Maples, John
Tredinnick, David


Marland, Paul
Twinn, Dr Ian


Marshall, John (Hendon S)
Walden, George


Marshall, Sir Michael (Arundel)
Walker, Bill (T'side North)


Martin, David (Portsmouth S)
Ward, John


Mates, Michael
Wardle, Charles (Bexhill)


Maude, Hon Francis
Warren, Kenneth


Mawhinney, Dr Brian
Watts, John


Maxwell-Hyslop, Robin
Wells, Bowen


Mayhew, Rt Hon Sir Patrick
Wheeler, Sir John


Miscampbell, Norman
Whitney, Ray


Mitchell, Andrew (Gedling)
Widdecombe, Ann


Monro, Sir Hector
Wiggin, Jerry


Montgomery, Sir Fergus
Wilkinson, John


Moss, Malcolm
Wilshire, David


Mudd, David
Winterton, Mrs Ann


Neale, Gerrard
Winterton, Nicholas


Nicholls, Patrick
Wood, Timothy


Parkinson, Rt Hon Cecil
Woodcock, Dr. Mike


Patnick, Irvine
Young, Sir George (Acton)


Peacock, Mrs Elizabeth



Raffan, Keith
Tellers for the Noes:


Renton, Rt Hon Tim
Mr. Tom Sackville and


Riddick, Graham
Mr. John M. Taylor.

Question accordingly negatived.

Order for Third Reading read.

Mr. Norman Lamont: I beg to move, That the Bill be now read the Third time.
The Bill has been less controversial than some of its illustrious predecessors. It has also been shorter. Nevertheless, it contains measures of substance, in particular on savings and for business. Debate on the Bill, both in Committee and on the Floor of the House,

has been characterised by a spirit of co-operation and good will. I pay tribute to the work of my right hon. Friend who is now Secretary of State for Trade and Industry and to my hon. Friend the Economic Secretary for their skill and hard work in negotiating the Bill through Committee.
I am glad to say that the Bill has also benefited from several amendments tabled by both Conservative and Opposition Members. I am rather worried about the unity of the Opposition Front Bench team. When we debated ESOPs in Committee it was suggested that the doubts expressed by the hon. Member for Newcastle upon Tyne, East (Mr. Brown) about the need to have a majority of worker trustees or a minimum transfer to employees were a bid to join the Conservative party. It seems that the hon. Gentleman has taken up that suggestion. In The Daily Telegraph of 6 July I found a short piece headed "Tory candidate". It reads:
Mr. Nick Brown, 37,"—
I shall not comment on that—
 … has been selected as prospective Conservative parliamentary candidate for Derby South, held for Labour by Mrs. Margaret Beckett.
I knew that the hon. Gentleman was after a Treasury job, but I did not know that he was after the hon. Lady's job.

Mrs. Beckett: I think that I should correct the record. The gentleman in question is not my hon. Friend but a gentleman who runs a debt collection firm in the city of Derby.

Mr. Lamont: I am very grateful for that clarification.
The eloquence and persistence of my hon. Friends, notably my hon. Friends the Members for Beaconsfield (Mr. Smith) and for Richmond and Barnes (Mr. Hanley), were instrumental in the introduction of the new clause on actors. I hope that by giving tax relief for agents' fees the clause has gone some way towards allaying the fear that schedule E treatment would impose an unreasonable tax on performers.
I am also grateful to the Opposition Front Bench for technical amendments on child care and charities and to the hon. Member for Berwick-upon-Tweed (Mr. Beith) for a helpful amendment on ESOPs.
The Government have also introduced several new clauses and amendments since the Bill was read a Second time. Clauses 25 to 27 give effect to the proposals announced in the Budget to introduce gift aid. For a long time charities have asked for tax relief for one-off gifts to supplement the considerable reliefs that we have already introduced. We were glad to have been able to make a further extension to the reliefs available. It was suggested that the £600 minimum limit was too low. But I am sure that hon. Members will appreciate that it is not practical to give tax relief for all small one-off gifts to charities. Of course, the payroll giving scheme already offers tax relief for regular giving of small sums. Clause 24 raises the annual limit a further 25 per cent. to £600.
The levy on trust port privatisations, provided under clauses 114 to 119, was debated extensively both on the Floor of the House when we discussed the Ways and Means resolution and in Committee when several hon. Members tabled amendments. The trust ports are owned by the state, not by the Government, and it must be for Parliament to decide who should benefit from the proceeds of sale. As we said in Committee, it is, of course, a matter of judgment what proportion should go the Exchequer. I


explained in Committee that, in our view, a 50 per cent. levy on the proceeds of the sale both recognised the fair claim of the taxpayer and left plenty of money in the business and for the new shareholders. It will provide an appropriate return to the taxpayer for past investment in the ports while rewarding the considerable initiative of the port authorities in introducing private Bills and ensuring sufficient funds for new investment without giving the newly privatised ports a competitive advantage over their competitors.
Clause 30 and schedule 15, also introduced in Committee, provide for the abolition of composite rate tax from 1 April next year. The composite rate has been described as an abiding anomaly of the tax system. The hon. Member for Berwick-upon-Tweed has campaigned for a long time on this matter. It owed its existence to a long-running dispute between the Inland Revenue and the building societies in the latter half of the 19th century over whether and how tax should be collected from building society shareholders. CRT provided a compromise solution and came into effect in 1895. Sir Stafford Cripps proposed that it should be given a statutory basis in 1950, and this was effected in 1951 when Mr. Gaitskell was Chancellor.
Everyone would agree that the composite rate has had a good innings and, although its administrative advantages should not be underestimated, the rapid growth in depositors and a growing number of non-taxpayers, with the introduction of independent taxation, means that it is time for it to go. Removing CRT over such a short time scale has presented the Inland Revenue with a major programme of work. I should like to pay tribute to Revenue officials for their positive response and for the rapid progress they have already made in dismantling the composite rate system.
Abolition will benefit those savers who do not pay tax, a quarter of the population in all. Five million married women will gain, along with 4 million pensioners, 2½ million other adults, and 2½ million children.
The abolition of CRT will support and complement the other savings measures contained in the Bill. Clause 28 will ensure that TESSAs—tax-exempt special savings accounts—are available from banks and building societies from next January, offering savers the opportunity to invest up to £9,000 over five years, with interest entirely tax free if the capital is left undisturbed.
The beauty of TESSA is its simplicity and flexibility. We have had contractual savings schemes in the past, but they have always been considerably regulated, burdened by a plethora of rules and an interest rate determined by the Government. TESSA is different. The institutions will be free to offer competitive rates and savers will be able to take their interest in the way which suits them best—either in the form of a regular income, which will suit those retired, or rolling it up within the account, which the younger saver may prefer.
The advent of TESSA has received a wide welcome, even before the final details have been settled, and a number of banks and building societies have said that they will be participating. I believe TESSA will contribute towards encouraging the saving habit and that it will be the success it undoubtedly deserves to be.
The Bill does not, however, just benefit bank and building society depositors, important though they are.

Savers through friendly societies will benefit from the 50 per cent. increase in the annual limit on premiums payable under tax-exempt life insurance policies.
Investors in equities will benefit from the abolition of stamp duty on shares, which gives Conservative Members particular pleasure. Stamp duty is an ancient tax dating back to 1714, the year of Queen Anne's death. I regret that it was introduced by a Tory Administration; and it has become increasingly anachronistic. It always seemed curious to me that, if one put one's money in a building society, one paid no tax, but if one put one's money into shares, one incurred an immediate loss on one's savings in the form of stamp duty. We have already halved this surcharge twice from the high level of 2 per cent. we inherited in 1979, but it is now time to take the final step. Abolition will help not only the direct investor in shares, but the tens of millions of people who save through the institutions, whether through pension funds, life assurance or unit trusts. It will also strengthen the competitive position of the City, which we all have in mind as we approach 1992.
The increase in personal equity plan limits and the ESOP measures included in the Bill will also widen share ownership. Clauses 31 to 40 will introduce capital gains tax deferral for sales of owners' shares to ESOP trusts, which have received support from Members in all parts of the House. The Committee debates this year and last on ESOPs were like a meeting of the ESOP appreciation society, with no one waxing more lyrical than the hon. Member for Newcastle upon Tyne, East. Roll-over relief for sales to ESOP trusts will provide a further impetus to that special form of employee share ownership.
Taken together, the measures I have described add up to a major package for savers and form the centrepiece of the Bill. In the medium term, they could play an important role in ensuring balance between savings and investment, which we discussed in earlier debates. Of course, in the short run there is no substitute for monetary policy.
There is more to the Bill, however, than savings. It contains important measures for business which may not have been headline-grabbing measures since they were targeted at the smaller, less glamorous company. The rise in the profits limit for the small companies' rate of corporation tax to £200,000 and £1 million represents a doubling in two years. That will reduce the tax burden for 20,000 companies.
The simplification of VAT registration rules will be of particular benefit to smaller companies replacing three complicated turnover tests, which required companies to assess an uncertain future, with one simple test based on turnover over the past 12 months.
We have also tackled what many considered unduly onerous provisions concerning VAT relief for bad debts. Under the current scheme, bad debt relief is available only in the event of formal insolvency. The provisions in the Bill replace that for an automatic relief for debts which have been outstanding for two years. These proposals will save business £150 million in a full year, and have been widely welcomed. Indeed, as seems to be the case with much of the Bill, the main criticism, if any, is that we are not going far enough.
We appreciate the concern that has been expressed by hon. Members and outside organisations. There has been some suggestion that the two-year period is still too long and that it should be reduced. Clearly any line is somewhat arbitrary. We settled on two years in the light of the


concern that there might be scope for abuse within a shorter time period. The other major concern was that some companies will have to wait somewhat longer for relief. That is true, but it is a cash-flow loss since they will get the relief in due course. No company is a cash loser from the scheme.
The issue of the tax treatment of the doubtful sovereign debt provoked a lot of heated and lengthy debate, which I am sure was fruitful. The purpose of the provisions, which were again debated today, is to provide a more certain method of calculating the tax deduction that can be made for doubtful sovereign debt and to smooth out further increases in the cost of relief to the Exchequer while preserving the principles on which tax relief is based.
Another measure that has provoked a lot of debate is the benefit-in-kind exemption for workplace nurseries. A number of hon. Members, including the hon. Member for Berwick-upon-Tweed, argued for a broader relief. I believe that we have drawn the line correctly. In the past decade the dominant thrust of tax reform has been to widen the tax base. The more one does that, the lower one can set marginal rates. That remains our policy and we must not lose sight of that. It is a targeted relief, which is inexpensive. In removing the small existing obstacle, we have simplified the system and given a small push to employers to provide more nurseries.
This is the fourteenth Finance Bill introduced by the Government. It builds on our record of tax reform and includes a series of measures for savings and giving. It will also encourage wider share ownership and help business. I commend it to the House.

Mr. Nicholas Brown: First, I congratulate the Financial Secretary to the Treasury on his promotion. He carried the main burden of work for the Government, as the Financial Secretary always does, when steering the Finance Bill through Committee. I am sure that I am giving away no secrets when I say that many of my hon. Friends predicted a move for him.
I can understand the Prime Minister's thinking in this matter. She emerged beleaguered from her bunker, eyes glazed and fixed, staring at eastern Europe. Looking around her dwindling band of loyal, fanatical right-wing supporters she picked the most Teutonic-looking she could find, pinched him on the cheek and sent him off to his new post to hold out for as long as he could.
I am genuinely sorry that the Financial Secretary is leaving Treasury affairs and I offer him two helpful pieces of advice for his new job. First, be nice to the Germans. Secondly, and perhaps closer to home, look out for the Scots.
In our approach to the Bill, the members of the parliamentary Labour party have been conscious, as we were last year, of the views and advice of the Treasury and Civil Service Select Committee and the fact that the details of the Bill are not scrutinised in the other House. That places a heavy burden of responsibility on the shoulders of the Opposition, and I include in that the hon. Members for Berwick-upon-Tweed (Mr. Beith) and for Orkney and Shetland (Mr. Wallace). We tackled that burden in a thorough and carefully researched way.
The Chief Secretary referred to some of the changes that we managed to make to the Bill. It is important for the House to remember that the composition of the Committee reflects the composition of the House. It is therefore not possible for the parliamentary Labour party—although we tried hard—to get its way with amendments by force of votes. We have to persuade the Government of our case rather than outnumber their supporters. It reflects enormous credit on the work that my hon. Friends put in that we managed to achieve so many changes to the Bill. I will take the House through a few of them.
Clause 25, which relates to gift aid, is perhaps the most significant single example that I could cite. As originally drafted, that clause would have allowed any individual who made a qualifying gift aid donation to escape all higher rate tax for that year. Although the Government voted against our attempted reforms in Committee, they finally conceded on Report that they had made an error and accepted our amendment No. 41.
If that error had become known and used by the majority of higher rate taxpayers, it could have cost the British Exchequer a substantial sum, possibly as much as £4 billion, and potentially even more in the absence of retrospective correcting legislation. I believe that such correcting legislation would have been almost inevitable. When the Chief Secretary, in the run up to the next general election, tries to add up the Opposition's public expenditure programme and attempts to cram everything that we propose to do into year one and make it look as expensive as he can, I hope that he will have the decency to deduct from that vast and undoubtedly massively overstated total the money that we have saved the Inland Revenue with amendments of that sort.
When we discussed clauses 31 to 40—the provisions relating to ESOPS—there was a consensus in the Committee. ESOPS has its supporters on all sides. A number of drafting points arose, which were successfully addressed by the Opposition and the Government accepted our case. As originally drafted, those clauses would have allowed many substantial sales of shareholdings in companies with ESOPS to be carried out free of tax. That could have been achieved by selling the shares at full market value to ESOPS and investing the proceeds in assets on which, in practice, no chargeable gain would have arisen when they were sold. Private homes and BES shares were the two major examples.
We referred on the Floor of the House to the loophole in relation to private homes, and soon afterwards the Government tabled new clauses 14 and 15 to close it. The cost of that error, if uncorrected, may be difficult to assess because it would have required greater use to be made of statutory ESOPS, but it is clear that within a few years the abuse could have led to a substantial loss to the Revenue. It is right that the parliamentary Labour party should play its part in ensuring that such errors are corrected.
When we discussed TESSA and SAYE we found that, as originally drafted, the TESSA legislation would have stopped banks and building societies deducting for corporation tax purposes the interest paid on TESSA accounts. The Government accepted our point in Committee. Yesterday, on Report, the error was corrected. The Government also realised that the SAYE rules, on which the TESSA rules were based, must have


been similarly flawed for the past 20 years or more. They introduced amendment No. 19, at least in part retrospectively, to correct the flaw.
Many other matters were successfully addressed by the Opposition. When we discussed gift aid we suggested that a de minimis limit should be set. The idea was rejected, reconsidered and finally implemented. That correction was made yesterday by Government amendments Nos. 11, 12 and 15. We also suggested that the word "payment" in the gift aid clauses was not wholly clear. In response to our representations on that, the Government clarified the Bill.
The Chief Secretary referred to the extensive debate that we had, in which the hon. Member for Beaconsfield (Mr. Smith) took part, about the tax treatment of actors. Our pressure, combined with pressure from Conservative Members, gained from the Government a concession that was introduced in new clause 7. Actors who may be following these matters should reflect that the parliamentary Labour party turned up in full strength to vote for a new clause to secure the concession. We would have voted for a new clause standing in the name of the hon. Member for Beaconsfield had we had the opportunity to do so and we tried to create such an opportunity by attempting to prevent the hon. Gentleman from withdrawing his proposal, but he did not feel able to stand by his guns. Had he done so and carried two or three of his hon. Friends with him, the concessions could have gone even further.
On the question of personal tax returns, there was unanimity in part on the points that we made in Committee because the views that my hon. Friends and I expressed were echoed by some Conservative Members. Those efforts gained from Government amendment No. 24. The point of our amendment was expressly to limit the inspector's power to ask for extra information to accompany individuals' tax returns. In other words, we limited it to information relevant to the individual's tax liability. Our purpose was to prevent fishing expeditions—a practice that we regard as undesirable—and a number of Conservative Members agreed with us on that.
We persuaded the Government to amend the clause dealing with child care. It would be wrong of me not to refer to a success that was achieved from the Opposition Back Benches. My hon. Friend the Member for Vauxhall (Miss Hoey), supported by hon. Members on both sides, pressed the Government to backdate the reduction in the rate of pool betting duty and this was agreed to by the Government.
The Bill as drafted was amended substantially in Committee and again yesterday on the Floor of the House. The main reason for so many changes being made was that the Bill was sloppier in its drafting this year than had been the case with Finance Bills in the previous two years. No clause exemplified that more than the clause dealing with waste disposal, which we discussed at length, the Opposition desiring not to allow to go through uncorrected that which ought to be corrected. As originally drafted, the clause was a disaster and would have been virtually unworkable. The suggested changes, recommended largely by the industry, were reflected in a huge number of amendments, many of them in identical terms, tabled by the Government, by the Opposition and by Conservative Back-Bench Members. It must be almost unprecedented for a Government to table seven amendments to one short clause of a Finance Bill in Committee to correct appalling drafting. A total of 35

amendments tabled to such a clause, of which 33 were designed to correct drafting errors, must be an all-time record.
I should like to place on record our thanks to the hon. Member for Staffordshire, South (Mr. Cormack) and to my hon. Friend the Member for Neath (Mr. Coleman), who chaired our proceedings in such a good-natured way and facilitated our discussions. I am sure that that view is shared by Conservative Members. I should also like to thank my hon. Friends who came on to the Finance Bill Committee and gave us such support. I hope that I do my hon. Friend the Member for Hackney, North and Stoke Newington (Ms. Abbott) no harm in expressing my thanks for her loyal support to those on the Labour Front Bench. I should also like to thank my hon. Friends the Members for Nottingham, North (Mr. Allen) and for Newcastle upon Tyne, Central (Mr. Cousins), who is my next door neighbour, for Vauxhall, for Makerfield (Mr. McCartney), for Halifax (Mrs. Mahon), for Carlisle (Mr. Martlew), and for Glasgow, Central (Mr. Watson), all of whom played their part in supporting us in our successes on the Bill, for which I am grateful.
I am saddened, as I know that we all are, not to have had the services of my hon. Friend the Member for Leeds, West (Mr. Battle), who acts as the usual channels for the Labour party—a duty that seems to have fallen on my shoulders by default on the part of everybody else who let me do it. I know that hon. Members on both sides will wish my hon. Friend a speedy recovery from his back injury.
I understand the restraints placed on Conservative Members during the course of the Bill, but I am surprised that Conservative Finance Bill Committee Members have not been taking part in today's debates on the Floor and did not take part in yesterday's debates. It is often said that Back Benchers on the Government side are wanted for their bodies, not their minds—an appalling prospect, but there it is—and that was nowhere more evident than during the discussion on clause 74. The largest rebellion on the Conservative side came in relation to that clause, which deals with the tax treatment of banks' sovereign debt. The division in the Committee was clear cut—Labour Members spoke for the third world, and Conservative Back Benchers spoke for the banks. Three of those Conservative Members, as two of them properly declared, have financial interests in banking. The banks involved are the Saudi International bank, Morgan Grenfell, a merchant bank, and the Standard Chartered bank.
Hon. Members will be asking who those Tories are. Like other Conservatives, they have certain characteristics that we can identify from the past and expect to find in future. It is easier and more pertinent to the present discussion to think of their less happy characteristics, such as the insensitivity to others' feelings which was most noticeable in their behaviour on clause 74 when dealing with the debts of overseas Governments, their obsession with themselves, their strong inclination to self-pity and their longing to be liked. Some even less flattering characteristics can be attributed to those Conservatives as an abiding part of their character—in alphabetical order, angst, aggressiveness, assertiveness, bullying, egotism, inferiority complex and sentimentality. Two further aspects may be cited as reasons for concern about those people. The first is their capacity for excess—they love to overdo things and kick over the traces, as I am sure that the Chief Secretary will recognise. Secondly, they have a


tendency to overestimate their own strengths and capabilities, and so it came to pass when we voted. I am sure that the Government will be grateful to me for that penetrating analysis and I hope that it will help them with their management of future Finance Bills.
Before leaving the Conservative party's performance on the Bill, I must say a word about the performance of the Chief Secretary to the Treasury. As the House has discovered, this is the third Finance Bill on which I have served and I am probably the Chief Secretary's greatest fan, although certainly not his only one. I admire his rumbustious performances in Committee and his command of the detail. In Committee he showed us how the Financial Secretary's job used to be done when he had the job—taking in washing and carrying out duties for the Secretary of State for Transport—in the exciting debate that we had on the clauses relating to privatised docks.
The Chief Secretary brought back memories for me and for many of my hon. Friends who have served on such Committees before. He did the job well, with style and panache, but I hope that as the job is vacant he will not get it back: the Opposition have a different candidate for the post of Financial Secretary. Given that the Chief Secretary unaccountably ruled me out in his opening remarks, I think that the Opposition would vote for the Economic Secretary to get the job. Conservative Members will have to make up their own minds whether I am entirely sincere in putting forward for the post a person whose ability and decency in dealing with the Bill has won him genuine friends among the Opposition, or whether by recommending him I am seeking to destroy the chances of anyone competent getting the job in the hope that a less able person will be chosen instead. I leave the matter ambiguous so as to achieve the result that I want.

Mr. Norman Lamont: Who does the hon. Gentleman want for the leader of the Liberal party?

Mr. Brown: I will see about that next year.
We have scrutinised the Bill in some detail and we have had some successes. We have relied heavily on our advisers and I think that the Government recognise that we have been well served by the whole of our team of advisers this year. I know that my colleagues on the Front Bench and my parliamentary colleagues who served with me on the Bill would like me to put on record our particular thanks to Mr. Steve Tovey, who had acted as our principal adviser. The advice that we have received has been of a high calibre and Mr. Tovey's diligence, hard work and sheer professionalism mean that it is he and not we who should take the credit for our successes with the Bill. That credit rightly belongs to him, while the blame for the Bill's shortcomings rightly rests with the Government.

Mr. Ian Gow: We have just listened to a most agreeable speech from the hon. Member for Newcastle upon Tyne, East (Mr. Brown). This has so far been a most agreeable debate. It will be a matter of deep regret to you, Mr. Deputy Speaker, as it is to me, that we were not members of the Standing Committee. I have not served on the Standing Committee of the Finance Bill since the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) was Financial Secretary to the Treasury. Then we

had agreeable Standing Committees on the Finance Bill and the right hon. Gentleman, who, characteristically, is in his place, made a deep impression on the Standing Committee, as did my right hon. Friend the former Financial Secretary on this Standing Committee.
We are coming to the end of the annual ritual of the Finance Bill. It starts on Budget day when the Red Book is published. In less than two hours, this Finance Bill will have completed its journey through the House. An agreeable ritual accompanies the Finance Bill, and it is clear that the good will in Standing Committee has been extended to the Third Reading debate.
I shall address my remarks to only one aspect of the Finance Bill. My right hon. Friend the Chancellor has made it clear again and again that the overriding objective of the Government is to defeat inflation. Let us note how the military metaphors always apply to inflation. One may wonder what the Finance Bill has to do with defeating inflation. It has nothing whatever to do with the Government's monetary policy, but it has a great deal to do with their fiscal policy.
In each of the past three years there has been a substantial public sector debt repayment, and I warmly welcome that. The first of those three years was the first time there had been a repayment of debt since Lord Jenkins of Hillhead was Chancellor of the Exchequer. His achievement gave rise to admiration among many of my right hon. and hon. Friends. It fell to my right hon. Friend the Member for Blaby (Mr. Lawson) to fashion the first of three successive Budgets which repaid debt—a policy greatly to be admired and one continued in this Finance Bill.
The Finance Bill provides for a statement, made on 20 March, of public sector debt repayment for this financial year of a further £7 billion. I thought at the time that that target was not high enough. The excise duties should have been increased further than they were. Although less than four months have elapsed since my right hon. Friend presented his Budget to the House, the truth is that the estimate that he then made of public sector debt repayment for this financial year has already proved to have been too optimistic. That is not just my view; the Treasury also believes that there is a real likelihood that the public sector debt repayment outturn for this financial year will be less than the Chancellor forecast on 20 March.

Mr. Graham Allen: Will the hon. Gentleman concede that the Treasury is borrowing money at the moment and that although there may be a net repayment by the end of the year it may prove to be small; and that there could even be net public sector borrowing by the end of the financial year?

Mr. Gow: As the forecast by my right hon. Friend less than four months ago appears to have been too optimistic about the size of the public sector debt repayment, and as Treasury forecasts made by people, however eminent, have turned out in the past to be dramatically different—[Laughter.] I see that I carry the House with me. I hope that I am carrying Treasury Ministers with me. I am asserting the plain truth, acknowledged in the Red Book. Treasury forecasting is about as accurate as some of the weather forecasting that we receive—it is wildly out.
The Red Book is littered with commitments to defeat inflation. For hon. Members who may think that I am exaggerating, I offer paragraph 1:
The objectives of the Government's economic policy are to defeat inflation.
Paragraph 2 states:
The central objective of the Medium Term Financial Strategy is the defeat of inflation.
My right hon. Friend the former Financial Secretary then goes on to list the evils that flow from inflation, and I could not have put them better myself. I am pleased that the Economic Secretary is in his place; he is the architect of our monetary policy. I am glad that he has shown his characteristic courtesy by coming in, but in any case this is what the Financial Secretary said:
Inflation damages the economy by increasing uncertainty, discouraging investment and reducing profitability. The social effects of inflation are no less destructive. Inflation redistributes income and wealth arbitrarily and capriciously.
I agree. One might have hoped, in view of that powerful and accurate analysis of the evils that flow from inflation, that the policy would have been more effective than it has been.
I hope that my right hon. Friend the Chief Secretary will be given leave to address the House again because I want to remind him, and the Economic Secretary, and the Lord Commissioner, who also has some responsibility for these matters, of what our party said in its previous two election manifestos—

Mrs. Beckett: What about the next one?

Mr. Gow: It is not yet fashioned. It will be interesting to see whether the same commitments made in 1983 and 1987 are repeated in 1992. The hon. Lady and I will be watching for that with the keenest anticipation.
I do not want to go back too far, but it is fair to go back to 1983, when we said:
In the next Parliament, we shall endeavour to bring inflation lower still. Our ultimate goal should be a society with stable prices.
In 1987 the manifesto said:
The Conservative Government will continue to put the conquest"—
note the military metaphor—
of inflation as our first objective. We will not be content until we have stable prices with inflation eradicated altogether.
If my hon. Friend the Economic Secretary would like to intervene, I shall give way to him—but I see that he would not. So he does not quarrel with those words, upon which he and I fought the last election.
Another matter which appears in the Red Book is the exchange rate mechanism. On page 22, the following words appear:
Tight monetary and fiscal policies will be maintained … The Government sees membership of the Exchange Rate Mechanism … once its conditions have been met, as complementary to the MTFS policy framework.
If we join the exchange rate mechanism and by doing so we agree to use our best endeavours to keep sterling within a certain narrow range as compared, in effect, with the deutschmark—although my hon. Friend the Minister will say that it is compared with a basket of currencies—and if sterling appreciates so that it is in danger of going above the higher parameter that has been set, and if my right hon. Friends are then obliged to abate interest rates, what will happen to inflation 18 months to two years later? That is the drama with which the Treasury will be faced if we join the ERM, because the Government have said that they want to abolish fixed exchange rates and move to a floating exchange rate, and that is what we have done—apart from the period when my right hon. Friend the former Chancellor was shadowing the deutschmark. Apart from

that, we have said that we want a floating exchange rate. The moment that we join the exchange rate mechanism we shall go back to precisely that policy which hitherto the Conservative party has rejected.
No doubt there are advantages in joining the exchange rate mechanism, but I advise caution on the part of the Treasury and the Lord Commissioner, who studies these matters with great care.
I shall vote with enthusiasm for the Third Reading of the Bill, although I think that the Government's fiscal stance is not tight enough. We could have borne down heavily upon inflation because the key elements in defeating it are tight monetary policy and a tight fiscal stance. The Bill should provide for higher excise duties, especially because the Chancellor's estimate of £7 billion for the public sector debt repayment is likely to be less.
I hope that the Treasury will reaffirm our commitment to persevere with the policy of abating inflation until that evil is finally removed from our economy, which in recent years has shown that it is peculiarly resistant to our attempts to defeat inflation.

Mr. Beith: The hon. Member for Eastbourne (Mr. Gow), with whom I do not always agree, spoke about inflation and the role of fiscal policy in dealing with it. He is right that when we are in the exchange rate mechanism, which the Government intend to join, interest rates will not be readily available as a tool of economic management for other purposes. It follows that what the hon. Gentleman said about the Bill will be even more relevant to future Chancellors as they consider what part the level of taxation should play in controlling demand in the economy.
Like the hon. Gentleman, I think that the Government were mistaken in their assumptions about the necessary level of taxation this year. Future Governments who say that there will be no increase in taxation, or that it will continue to fall until income tax is 20p in the pound, will be ignoring the position in the exchange rate mechanism. They may seek their objective by taxes other than income tax, such as excise duties or VAT, but there are certain dangers in that course. Fiscal policy will become more, not less, important when we are members of the ERM.
The hon. Member for Eastbourne talked about the military metaphors that are applied to inflation. At the end of his speech he unwisely slipped into non-military terminology—the rather soft, peace corps terminology that the Government have started to use about inflation—when he talked about "bearing down" upon inflation. It is possible to bear down on something which is still going up and which will continue to go up. That conjures up the picture of a person throwing himself over the fuselage of a well-fuelled ascending aircraft in the vain hope that he can arrest its ascent by his weight. There is no sign that the process of bearing down is stopping inflation from rising. We are a long way from stable prices and zero inflation.
The other member countries of the ERM, and the Federal Republic of Germany in particular, are nearer to stable prices and the achievement of zero inflation. What do they have in addition to fiscal policy and the other mechanisms that we might seek to use? They use all sorts of measures to which the hon. Member for Eastbourne and the former Secretary of State for Trade and Industry are most hostile, such as a central bank with autonomous


responsibility for price stability. I cannot understand why Conservative Members who care deeply about inflation do not recognise the success of the mechanisms that they are so prone to criticise.
Several hon. Members have privately said to me that the Bill is boring. That in itself is not a criticism, because it is not the purpose of legislation to provide entertainment for legislators. If some of the exciting Bills this Session had not gone through the world would be a better place and Britain would be a better country. The poll tax Bill provided plenty of excitement, but now it is all misery for our constituents. Being boring is not in itself a bad feature of legislation. It is possible for legislation to be worthy as well as boring—as is this Bill in some respects.
The Bill proposes tax-exempt saving schemes and the abolition of composite rate taxation, about which the Chief Secretary was kind enough to say that I have campaigned for a long time. If he had started on that road a year ago he would not have had the awkward transitional year of independent taxation before composite rate taxation is abolished. In that year it is in people's interest, and especially in the interests of married women, to take offshore bank and building society accounts because the composite rate taxation scheme is not yet in place. It seems much more sensible to proceed more quickly to the removal of composite rate taxation. Nevertheless, I welcome this long overdue tax reform and I am pleased that it is in the Bill.
I welcome the use of tax changes in the Budget to improve safety at football grounds. We would have liked the Government to go further and bring an end to the removal by the Exchequer of so much money each year from amateur sport. Some Labour Members supported us in the Lobby yesterday. I am not sure of the precise number, but we were not supported by all those Labour Members who were present. That was disappointing.
I welcome the proposals on third world debt, although they are but a small part of what needs to be done. We need much more official debt cancellation and there is obviously a need for the measures that we discussed earlier to increase the incentive on banks to write off or sell private sector debt.
I also welcome the proposals on employee share ownership and I hope that the useful improved tax incentives will make the system more attractive. It is striking that the statutory basis for employee share ownership still has so many features that make it an unpopular means to the desirable extension of employee share ownership.
The Government's proposals on workplace nurseries created a ripple of excitement when they were first announced. However, they make a paltry contribution to child care. By themselves the proposals are not logical. The Chief Secretary keeps saying that help is targeted, but it is not. The measure will assist that limited number of women who work in industries and factories that have workplace nurseries. There is nothing well targeted about it and it will not help any especially deserving group of women. I am glad that there is to be tax relief, but I should like to see it much more widely extended by the sort of voucher tax relief that I proposed yesterday and in earlier debates on the Bill and which Labour did not support. That would attract money from employers to child care more

effectively than the workplace nursery proposal could ever do. That is for the obvious reason that workplace nurseries are simply not appropriate for large sections of the retail trade, for the whole of small business and for many industries.
The Government are quite wrong in their approach to the port levy. They have introduced what they say is a 50 per cent. tax on the privatisation ports. However, most people in the industry say that in practice the tax will be much larger, partly because it is combined with other tax liabilities and partly because it is assessed at market value. If ports seek to place their shares in local communities or in local institutions to keep the money in their own regions rather than seeing it all go to the Exchequer, they will be taxed as though they had not done so. That will discourage ports with a sense of responsibility to their areas from taking the privatisation route. At the moment only two ports are going through the process. If there had been only one perhaps the Finance Bill would have been ruled as hybrid. That would have made an interesting change to our proceedings.
The Chief Secretary has said that if other ports seek privatisation through the private Bill procedure and manage to devise schemes which ensure that more resources are available for the port and the improvement of the infrastructure in the area round the port, he will introduce retrospective legislation to make sure that those ports pay the full 50 per cent. That is an unusual undertaking by the Government. It is a deliberate disincentive to the devising of schemes by which resources that have been largely contributed by local communities and through local effort and enterprise could be retained in those areas.
The Chief Secretary said that a 50 per cent. or greater levy was a reasonable rate of return on the Government's investment in the ports—[Interruption.] He said that, and I wrote it down. Frankly, if the Government were offering any savings instrument that created a return of 1,000 per cent. or more which—will be the Government's return on their investment in the ports—there would be queues outside every post office in the land to buy such remarkable savings certificates. The Government are obtaining a nice rake-off because they think that there is money that no one appears officially to own. That money would be better used improving the roads and the rail services to the ports and in freeing those who have to live round the ports from environmental and other pressures created by the expansion of those ports.
There are omissions from the Bill. There is little on environmental aspects other than further measures on the taxation of cars as a benefit. However, it is still more tax-efficient to buy a married woman a car than to provide her with child care facilities. That is a strange sort of level playing field—a phrase that the Government are so fond of using—but I recognise that the Government have gone some way along that road, although they need to go further. A great deal more could have been done, such as tax incentives for catalytic converters, reform of the vehicle excise duty, help for industries involved in recycling, incentives for recycling, and so on. Instead, the Government are sitting around awaiting proposals from the Secretary of State for the Environment that will come at a time when they cannot be introduced until, at the earliest, next year's Finance Bill.
The Committee proceeded in the most cordial atmosphere, and I am sure that it would have co-operated


if the Government had seized the opportunity to introduce new clauses to deal with the appalling circumstances presented by the poll tax. If the Government had suggested major changes that would have brought immediate relief this year and paved the way for getting rid of the tax next year, I am sure that the Opposition would have co-operated to ensure that such clauses were passed quickly into law. The Bill could have tackled other issues, such as the integration of income tax and the national insurance system and the reform of capital taxation. However, those will have to wait for another day.
The Finance Bill has been a sideshow to the economic divisions within the Government. While we were debating the details of taxation, the Chancellor was not gracing our proceedings. Even the Chief Secretary must, at times, have been distracted by the arguments within the Government about whether and when we should join the exchange rate mechanism, European monetary union and what the Governor of the Bank of England said about how he views the role of the Bank of England. All that culminated, in the closing stages of the Bill, in the promotion of the Financial Secretary to Secretary of State for Trade and Industry. He kindly stayed in his Treasury post to complete the Bill. I do not know whether he has been paid two salaries for the three days that he has performed his two roles. His departure symbolises the chaos within the Government over the most fundamental features of economic policy and which made the whole of the Finance Bill look like a minor sideshow.

Mr. Jeremy Hanley: The hon. Member for Berwick-upon-Tweed (Mr. Beith) said that the Committee had proceeded in a cordial atmosphere. All who served on it would agree that, in the main, there was a cordial atmosphere. Indeed, as my hon. Friend the Member for Eastbourne (Mr. Gow) said, the Budget was a most impressive start to that procedure. It must have been an extremely difficult task for a new Chancellor, at a difficult time, to introduce exactly the right Budget that was needed by the nation. There is little doubt that the general impression given not only by the Chancellor but by the economic pundits was that it was a skilful Budget, clearly and cleverly presented.
I am pleased that the Committee generally continued in that atmosphere. However, it is strange that the Opposition claimed that Conservative Members were only Lobby fodder, subservient to their masters, yet on the one occasion that there was a major debate involving Conservative Members they complained, as though only Opposition Members had the right to speak. I note that my hon. Friend the Member for Cannock and Burntwood (Mr. Howarth) is present, and he was one of those who spoke at extreme length on that occasion.
The Finance Bill was delicately steered through the Committee by the Government team. My right hon. Friend the Chief Secretary was extremely well served by my right hon. Friend the Member for St. Albans (Mr. Lilley), now the Secretary of State for Trade and Industry. He showed the most marvellous lightness of touch through some of the long hours of debate. If Conservative Members had been as subservient as was suggested by the Opposition, it might be thought that the Government Whip had had an easy time. In fact, he had the most difficult and delicate task in keeping order when discussing

certain matters in which Conservative Members had either an expert or a particular interest. I assure him that he has kept his friends on the Committee, and the compromises accepted by the Government were most welcome.
The Opposition Front-Bench spokesmen were noted for, more than anything, their breadth of knowledge and of selection of individuals. It was one of the largest Front-Bench teams of any Committee. They are a most attractive bunch of people—

Mr. Ian Taylor: That is not how I would describe them.

Mr. Hanley: I think that their variety was attractive. In the main, the Opposition Front-Bench spokesmen were well humoured and there was only one occasion on which we sat until 2 am. The hon. Member for Wrexham (Dr. Marek) served his party's interests well. He is respected on both sides of the House. However, one man's brief introduction is another man's filibuster. After he had spoken for many hours, Conservative Members had the feeling that it was just the beginning of a much longer speech. The Opposition were almost cheating in employing him on their team because he could always be called upon to give a speech that Conservative Members would take a fortnight to prepare and at least a week to deliver.

Mr. Ian Taylor: Does my hon. Friend recall those vivid moments, which lasted for some six hours, when just one amendment from me provoked three and a half hours of debate? That shows the reticence and the skill of Conservative Members in taking three or four minutes to propose an amendment. It also shows the flowery language of Opposition Members.

Mr. Hanley: I suggest that my hon. Friend watches his back as he walks home tonight. Many of us had forgotten that it was his fault that the debate lasted for so long that evening. I am amazed at his honesty. I was wondering who the swine was. That might be unparliamentary language, Mr. Deputy Speaker, but had you been there on that occasion I am sure that you would share my vocabulary. My hon. Friend was brief in introducing his measure, just as many of us were because we had to get through the business.
I hope that the Opposition will not blame me for picking out one hon. Member, but I particularly enjoyed the maiden performances on the Labour Front Bench by the hon. Member for Brent, South (Mr. Boateng), who worked hard on what was clearly a most unfamiliar brief. We must welcome also the hon. Member for Newcastle upon Tyne, East (Mr. Brown), whose Geordie twang rang regularly round the Committee Room with great good humour.
I should like to refer to some of the milestones in the Bill. It is consistent with the Government's policy that we should create an economy in which individuals have a greater choice over the use of most of their income. They should choose how to spend their money and should be guided in spending it responsibly. There are two ends to that. First, we should not encourage people to borrow money. I believe that the current interest rate policy, although unfortunate and difficult for many, is necessary. Secondly, we should encourage people to give if they have a surplus. There is no doubt that the growing spirit of charitable giving, which is welcome, has been well rewarded by the Government.
The move to increase payroll giving from £480 to £600 a year is extremely constructive. It is disgraceful that Members of Parliament who so regularly castigate the Government for not giving enough to charity, for whatever cause they espouse, set a miserable example. Hon. Members will say that Members of Parliament must meet many expenses out of their meagre incomes—[Interruption.] There are no flies on me—well, there is one near me at present. There are 650 Members of Parliament who receive a regular salary for their work in the House. Fewer than 50 make deductions under the payroll giving scheme. It is not difficult to make such deductions. If Members of Parliament made deductions, they would benefit many charities of their choice, and there is a rich variety to which they could give. They could take advantage of the taxation savings by giving and they would set an example to people outside. Payroll giving is one of the most hopeful aspects of recent Budgets, but hon. Members should set an example.
Gift aid is hopeful for charities. In The Independent on 21 March, after the Budget, the Charities Aid Foundation said that the Budget was "a major breakthrough" and "a charities bonanza". It is a charities bonanza only if people take up the inspiration that the Government have given and if they give. That gift aid amounts to £600 or more up to a total of £5 million per donor. I hope that a new spirit of giving will result from the Government's contribution to the taxation system. I welcome the extension with respect to corporation tax.
This is a savings Budget, not just a giving Budget. Surely savings must be the main focus for it. The tax-exempt special savings accounts are a good way of encouraging people to save money in the medium term. An even better measure was the announcement that composite rate tax would go. There is always something miserable about a taxation system that is so inflexible that it makes those who should not under any normal system pay tax have to suffer a deduction. The fact that children who saved their pocket money and elderly people who saved a few pence and pounds suffered by saving safely was a miserable part of our previous taxation system. It has taken a Government of vision and generosity to get rid of composite rate tax so that those on low incomes and those with small savings can make the most of their deposits. The Government's move came as a surprise to the House, but it was totally consistent with the Budget's savings angle.
Personal equity plans have not always been a tremendous success because of the downturn in the market, with Black Monday just two short years ago.

Mr. Tim Smith: My hon. Friend speaks from personal experience.

Mr. Hanley: I speak from personal experience. It is one thing to have tax-free income and tax-free gains, but it can be a disadvantage to find that one has losses against which one cannot claim. No one ever said that investments always go up. Personal equity plans are a sensible way of saving money. They help to introduce the stock exchange and its ways to the smaller saver and to spread risk. I believe that this is an extremely good scheme. I know of

the personal interest of my right hon. Friend the Chief Secretary in the creation of PEPs, and I pay him full credit for that.
The annual limit on investment in qualifying unit and investment trusts will be increased from £2,400 to £3,000 and the limit for non-qualifying unit and investment trusts will be increased from £750 to £900. That is sensible and will help to reduce the risk in these investments. PEPs are not for everyone—there is no doubt about that. That is why the abolition of composite rate tax is such a wise move.
I disagree with some parts of the Budget. The threshold for inheritance tax has been increased in line with statutory indexation from £118,000 to £128,000. Most people who think of inheritance tax believe that it is right to tax wealth when a person dies. There is, however, one item which does not make one say that a family is wealthy but which on a death may give rise to a high payment of inheritance tax—the family home—[Interruption.] I wonder whether the fly has now departed.

Mr. Boateng: No, it is going towards the hon. Gentleman.

Mr. Hanley: As I am talking about inheritance tax, this may be relevant. What happens to a family which has lived in a home for some time and in which the children may be of adult age but not earning? It is a great tragedy that, as a result of the death of the second parent, the family should have to sell the family home. The value of homes now is often higher than £128,000, which is the maximum for inheritance tax. I know that there are ways of giving the house inter vivos, but an exemption should be introduced to allow children, while remaining in a home, to be exempt from the payment of inheritance tax, not only by paying by instalments, but by being wholly exempt for at least a time.
I regret the taxation of actors. We are, of course, talking not about actors in general, as so many hon. Members seem to think, but about the taxation of new actors in the theatre only. I am talking not about people who act in films or on television, or those who have been acting for more than the past three years. The Bill affects the newest and lowest paid in the lowest-paid part of the profession. I regret the introduction of this tax, although I understand the general trend in the Inland Revenue for calculating schedule E rather than schedule D in certain cases. I sympathise with the feeling of my right hon. Friend the Economic Secretary that such a tax had to be introduced this year and I am pleased that a genuine and major concession was introduced thanks to the new clause tabled by my hon. Friend the Member for Beaconsfield (Mr. Smith), supported by many colleagues.
It is typical of their approach to the Bill that the Government listened carefully to the arguments for many of the new clauses and amendments. I tabled a number of amendments, some of them on behalf of the Institute of Chartered Accountants in England and Wales. There was no blanket rejection of any amendment. The vast majority of them were picked up by the Government, considered carefully and sometimes reintroduced in words that were more acceptable.
The Government gave way on a number of Opposition amendments and accepted the Opposition's suggestions. I pay tribute to the research that has been afforded to the Labour party. Many of the Opposition's amendments


were non-political. Let us be fair: they were technical amendments and showed the depth of the research available to the Labour party. It is only right that Conservative Members should pay tribute where errors have been corrected and where a Bill has basically been improved by work, from wherever that work has been funded or from whatever source it has been derived.
The blind person's allowance will double to £1,080 at an annual cost of only about £2 million. That may seem a small amount, but it is a large improvement for people who deserve even more generous treatment. I am grateful for that.
We have had the final confirmation of the introduction of separate taxation for women. That is a milestone in the history of taxation. The fact that married women can now have total privacy in taxation affairs is very important. It is the only decent step for a Government to take and the fact that it has been introduced and carried through by this Government is a matter of pride to me. The independent taxation of women represents the removal of one of the last shackles on women. A married man, for example, was entitled to receive a tax rebate on money that had been paid by his wife through her PAYE if she had made an overpayment of tax, and there was nothing in law to make the husband pay that money back to her. That is how we treat chattels. It is only right that the party that first created a woman as its leader—[Laughter.]—that first created a woman as its leader and first gave a woman the opportunity to be Prime Minister was the first to give women true independence in taxation affairs. That is a great tribute to this party and to this Government.

Mr. Harry Cohen: It was a great revelation to hear that the Conservatives created women.

Mr. John Home Robertson: Just one.

Mr. Cohen: Yes, just one.

Mr. Home Robertson: And they got it wrong.

Mr. Cohen: Yes, they got it wrong in that instance.
I am sorry that I cannot join in the camaraderie which has pervaded this debate. One of the main reasons is that I was not a member of the Committee on the Bill—which has certain benefits—although I pay tribute to my hon. Friends and to Conservative Members who were. I know that they carry out an arduous chore. The other reason why I cannot join the general camaraderie is the nature of the Bill itself. There is almost nothing in the Bill that is relevant to our main economic problems. There is a lack of investment in the future, despite the continuing North sea oil boom—about £83 billion over the past 11 years. There is a lack of skills training, a continuing rundown of our welfare state and national health service, and growing public squalor in transport, education and environment. The Bill does nothing to address those problems and is a consequence of a peculiarly poor Budget.
The Chief Secretary mentioned wider share ownership. There are more individual share owners but there is a greater concentration of shares within the major companies—a greater concentration of power in fewer hands. It is significant that the Chief Secretary did not talk about wider home ownership. The Bill does nothing to help hard-pressed mortgage payers. The list of headings in the Bill does not even mention the subject despite the rising

number of arrears and repossessions. The Government's interest rates policy has caused the problem. That has been the main Government club with which they have bashed the economic crisis caused by the consumer credit boom which was let loose as an election bribe. The £20billion per annum balance of payments deficit is a consequence of the rundown of manufacturing investment.
As I said, the Government's high interest rates policy has been their club to bash the economic crisis. However, they are bashing new mortgage payers. There has been a rapid rise in interest rates—about 50 per cent. over the past 18 months. They have increased from about 10 per cent. to about 15·5 per cent. The Government claim to favour private home ownership and encourage people, particularly the young, to take out mortgages. They then leave them trapped by the rapidly rising mortgage rate. For example, in London, the average mortgage has increased by about £250 a month. That has contributed to inflation. I have seen a recent table showing that inflation in London increased by 14·9 per cent. from April 1989 to April 1990 and that was before the poll tax. That is 50 per cent. higher than the national average inflation rate. Increases in transport fares have been one contributory factor, but mortgage rates were the main factor. The Government are taking no action.
On Tuesday I introduced my Mortgage Assistance Bill but it received no response from the Government. That is why I am raising the issue again. This is an opportunity for the Government to respond. My Bill would have provided some options other than repossession for hard-pressed mortgage payers in the form of part ownership and shared ownership. It showed that something can be done witout too great a cost. There would have been some capital cost involved, but, in exchange, there would have been revenue income and considerable savings from not having to deal with so much homelessness.
The Treasury is to blame. High interest rates is the Treasury's policy and there is nothing in the Finance Bill—the main fiscal and economic policy of the year—to mitigate the problems that policy has caused.
The Budget was in March and it has been in Committee since then. We have had two days on the Floor of the House, yesterday and today. We have heard nothing—not a word—from the Government, who keep insisting that mortgage interest rates are not a problem. They have kept them off the agenda and turned a blind eye. When will they do something about the problem? When will they stop being complacent and take responsibility for the effects of their policy?

Mr. John Bowis: I served on the Finance Bill Committee for the first time this year—unlike other hon. Members who have spoken, most of whom seem to be aficianados of many years' standing—but I can vouch for the fact that it is a civilised Committee on which to serve.

Mr. Brian Sedgemore: Surely not.

Mr. Bowis: It is a civilised Committee and the atmosphere is contributed to by hon. Members of all parties and by the Chairmen of the Committee, to whom I join hon. Members in paying tribute.

Mr. Sedgemore: Really?

Mr. Bowis: Does the hon. Gentleman wish to intervene?

Mr. Sedgemore: I remember serving on four Finance Bill Committees one year. It was the year in which there was an emergency every three months and we used to sit through the night. Our sittings were bitter, nasty, unpleasant occasions. What is all this syrup that I keep hearing about?

Mr. Bowis: I, too, remember the days when the right hon. Member for Leeds, East (Mr. Healey) was Chancellor of the Exchequer. Nowadays we have more cross-party agreement on the wisdom of the measures introduced by the Chancellor of the Exchequer to enable Britain to progress from the position in which the hon. Gentleman rightly confesses that his party left it.
We had in the Committee a mixture of common sense and imagination, as well as a degree of technical detail. I have often admired my colleagues' ability to grasp and to enlighten us on such detail. As has been pointed out, we have had the bankers' drafts in some of our debates. I am glad to see my hon. Friend the Member for Cannock and Burntwood (Mr. Howarth) here—no doubt to complete the speeches that he made in Committee one evening, which served only to convince me that I was wise to by-pass banking as a career. But I jest. It was a good Committee which supported a good Finance Bill based on a good Budget.
The hon. Member for Leyton (Mr. Cohen) referred to home ownership, and I welcome his conversion to that cause. No doubt he will soon be coming across to support the party that created woman in its image. I am sure that the hon. Gentleman would accept that, as my hon. Friend the Member for Eastbourne (Mr. Gow) said, the best gift that we can give to homeowners is to get inflation under control. That is what the Conservative party's policy is all about and that is the background against which this year's Finance Bill should be seen.
Others have said before now that there are many mothers and fathers of inflation—not least, excessive pay demands and spending beyond one's means—but no one has accused savings of contributing to inflation. That is why the savings element in the Finance Bill has been so important. My hon. Friends have rightly paid tribute to the Bill's contribution towards encouraging savings. That is especially true of TESSAs and the announcement about the end of composite rate tax as well as the disappearance of stamp duty on shares. To coin a well-worn phrase, we are beginning to move towards a level playing field in savings, which many of us have supported. We welcome the move towards level playing fields, specifically the level playing fields of the football clubs and the health—in every sense—and safety of our football grounds. It is an imaginative and unexpected step that the Chancellor has taken: it is all very well for hon. Members to say now that they would have liked him to go further, but I welcome what he has done.
One item that I especially welcomed was the continued downward pressure on the company car perk—not that the Government are opposed to cars, to motorists or to all perks, but in constituencies such as mine we feel that more people should be using public transport to get to work. When we are trying to ensure that we have a good public transport infrastructure, it makes good sense to discourage people from using company cars.
The Bill also contributes to health. At last we have taken a step back up the tax ladder for tobacco products and, to a lesser extent, alcoholic products. That must be right. It is a great pity that in the last few Budgets it has been missed out. Those who support Parents Against Tobacco and other such organisations believe that ultimately the only way to deter young people from starting to smoke is to do so through prices. I hope that Treasury Ministers will continue that process in future years. I repeat the plea that I made in Committee for the committee that advises on the retail prices index to examine seriously the possibility of taking those items out of the index so that they are not seen as an inflationary item.
I welcome one item that is not in the Budget. The Government have wisely kept the structures and extent of value added tax as they are. I welcome the fact that they did not bow to some of the pressures from across the channel to impose VAT on the written word—books and magazines. It is wise of the Government to resist that, especially at a time when we are seeking to encourage education through the Education Reform Act 1988 and the national curriculum.
Like my hon. Friend the Member for Richmond and Barnes (Mr. Hanley), I warmly welcome the concession that was made for actors. I declared an interest in Committee as an unpaid director of an actors' touring company, the London Actors Theatre Company. I see at first hand young actors struggling to enter the profession and often living in scruffy surroundings such as mobile homes, cars and vans. They are the people who will be helped by the Government's concession, which will at least enable them to set off against tax the fees of their agents who will ultimately enable them, if they have the ability, to make their way in the profession. It is churlish of the Opposition to be critical of that measure, or of the welcome that the Conservative party has given to it. It is a genuine step forward for the acting profession, and especially for young actors.
I must also express my gratitude for the steps forward that have been taken for those with disabilities, especially the blind. It is parallel to a decision made elsewhere on deaf students, which is also to be welcomed. Although that may not have been included in the Bill, I am sure that my right hon. Friend the Chief Secretary authorised the expenditure. As we create wealth in this country, we should bear the vulnerable in mind. We need to create that wealth and to spend it where appropriate, and it is certainly appropriate to spend it on people with disabilities.
I welcome the Bill. It is a Bill for savings, for sport, for the environment, for health, for education, for charity, for arts, and for disability, but it will work only if we get the background of our policy against inflation right—and that will work through our interest rate policy. We are creating wealth. As we create wealth and reduce tax rates so that the tax take rises, we shall have money to spend. Through measures such as the Bill, we shall encourage people to save and to invest, and we shall enable service Departments to spend on areas of need, some of which I have highlighted. This is a wise Bill by a wise Government as part of a wide strategy to promote the well-being of our economy and our people.

Mr. Christopher Gill: My hon. Friend the Member for Eastbourne (Mr. Gow) alluded to the fact that the process that was set in motion on 20 March will soon be brought to a conclusion. Perhaps this is an appropriate time to look towards the deliberations that will soon be set in motion for the next Budget. I should like to help future members of the Standing Committee by suggesting how their deliberations could be made simpler.
I draw the attention of my right hon. Friend the Chief Secretary to the Treasury to table 1.2 on page 6 of the Red Book, which was published in March. He will see that, according to the latest estimate for 1989–90, receipts by the Inland Revenue from the six main taxes—income tax, corporation tax, petroleum revenue tax, capital gains tax, inheritance tax and stamp duty—will total £76.4 billion. That figure is somewhat exceeded by the total figure given in appendix F of Command Paper 1021 for the comparable year, when no fewer than 88 reliefs and allowances against those six same Inland Revenue taxes cost £80.3 billion. In other words, reliefs and allowances exceed the amount of receipts by £4 billion.
I do not think that that is a party political point, but it is one to which my right hon. Friend could usefully turn his attention. That position exists because all politicians love to say to the electorate, "We shall give you so much against this and so much against that." Of course, we are sometimes in danger of losing sight of the fact that neither this place nor the Government have any money of their own to give away, save that which they took from the taxpayer in the first place. To counteract that, I must commend to my right hon. Friend the continuation of the shift of the burden of taxation from a direct to an indirect basis.

Mr. Tim Smith: My hon. Friend will agree that the allowances to which he referred are mainly made up by personal tax allowances, tax relief on mortgage interest and tax relief for pension schemes. I have much sympathy with his view that we should broaden the tax base and cut allowances. Which of those should we tackle first?

Mr. Gill: My hon. Friend asked me a direct question. Being a fairly blunt hon. Member, I tell him that the allowance that should be addressed is mortgage interest relief. I am convinced that, far from helping the overall longer-term position of people who want to get their feet on the first rung of the housing ladder, the effect of mortgage interest relief has been to accelerate the price of houses. Bricks and mortar are an attractive proposition to anybody, not least because of the substantial allowances also given under the capital gains tax regulations, which again are an accelerator in persuading and encouraging people to invest in bricks and mortar, thereby making bricks and mortar far and away the most attractive investment as against traditional savings, investing in stocks and shares or other means of disposing of one's income.
In answer to a parliamentary question earlier this year, I was told that 70 per cent. of the Exchequer's revenue came from taxes which, broadly speaking, were raised upon production and that the balance—30 per cent.—emanated from taxes which, broadly speaking, were placed on consumption. As a nation, we should look towards reversing that equation. Initially, we should seek to equalise it. That shift of emphasis would have several

significant advantages. First, if we were to tax consumption more than production, we should be making a valuable contribution towards conserving the world's finite resources. My hon. Friend the Member for Eastbourne said that he regretted that we had not been harder in increasing duties in the Budget. By increasing duties on those resources which are finite, we would be very much in tune with the spirit of the age, which is towards conservation and the ecology.
Another benefit from continuing the shift towards indirect taxation and away from direct taxation would be to stimulate investment still further. That is important to us as an industrial nation. We need to invest as much as we possibly can.
A further advantage of a move towards indirect taxation and away from direct taxation would be to encourage spontaneous saving. Although I warmly welcome the introduction of tax-exempt special savings accounts in this Finance Bill, it would be preferable to create a situation in which a man's or a woman's disposable income had outlets that stood on all fours. In other words, the decision to save and to invest to buy a home, or to take out a pension scheme, would stand on all fours equally.
If we reduced direct taxation—at the same time it would be necessary to increase indirect taxation—it would be an enormous psychological fillip to all wage and salary earners who, let us face it, like to take home as much of the fruits of their labour as possible.
Finally, in my catalogue of the benefits of shifting the burden of taxation, much more importance would be given to that old fashioned word "thrift". I am sure that many hon. Members would welcome that.
This is a good Finance Bill. I welcome it, especially for the help that it gives to companies, to savers and to the environment. Like my hon. Friend the Member for Eastbourne, I shall vote for its Third Reading with enthusiasm.

Mr. Brian Sedgemore: I rise to speak only briefly because I know that many other hon. Members wish to participate. I wish to speak against the Finance Bill for three reasons.
First, the Bill does nothing to bring down inflation. Indeed, it shows that the Conservative party is the party of high and continuing inflation. A few years ago, inflation blipped at 3 per cent. Since then, the Government have embarked on a course which has debauched the currency, debased the coinage and depreciated the pound in everyone's pocket. Inflation is now exactly 9.8 per cent. higher than the Government's objective of zero inflation—a lamentable performance by any standards. Let there be no doubt about the fact that the Government are depreciating the pound in our pockets. The Labour party will be the Government of low inflation—[Interruption.] I shall come to the technical economic reasons for that in a moment.
Secondly, the Budget leaves the Conservative party as the party of high and continuing taxation. We have had the argument before. I see the Red Book on the Bench beside the Minister. If he cares to open it and look at the relevant tables, he will find that taxation as a proportion of gross domestic product is higher under the present Government than ever it was under a Labour


Government. If he looks into the far distant future and all the figures for the years ahead—I await the jeers of Conservative Members, but they too should read the Red Book—for 1991, 1992 and 1993, taxation will still be higher under the Conservative Government's own plans as a percentage of GDP than it ever was under a Labour Government. It is our money, as the Prime Minister says, that the Conservative Government for ever take away. That is a scandal, so let us hear no more about the Conservative party being the party of low taxation. The Labour party is the party of low taxation.

Mr. Normant Lamont: Why has the party of low taxation voted against all the tax cuts that we have introduced? Why did the shadow Chancellor of the Exchequer say that he did not expect that a Labour Government could reduce the tax burden?

Mr. Sedgemore: I could come to the global plans if I had more time. I could set out the macro—[HON. MEMBERS: "Answer the question."] I did not serve on the Committee. I did not discuss the reasons for the various amendments. If the Minister wants me to set out a macro-economic policy to provide lower taxation and set it against the background of how much we can and cannot borrow, I shall do so, but I fear that no other hon. Member would have the chance to speak before 10 o'clock.
The third reason why I oppose the Finance Bill is that it contains nothing to suggest that the Government have a coherent exchange rate policy. I remember a couple of years ago when we shadowed the deutschmark. The pound rose to DM3·25. That was a disaster, and it started a recession which was part of the lunacy of the previous Chancellor of the Exchequer, from whom we have had apologies for that. The Minister has said that he, too, was partly to blame. The Governor of the Bank of England has also said that he was partly to blame. From then on, we saw a rapid depreciation of the pound. I should call it a devaluation, but I understand that if the market and not the Government causes it, it is called depreciation.
Then the pound fell to about DM2·8. Now the policy is in reverse. The Government systematically leak that we are about to join the exchange rate mechanism, so the pound is rising. It has risen to DM2·9 and it looks as though it may rise to DM3. What is this swings and roundabouts policy? The pound goes up to DM3·25, down to DM2·8 and back up to DM3. It is beginning to look as though the Government will join the ERM with an exchange rate of DM3 at the lower end. That is a deflationary policy. We shall enter the ERM throwing people out of work and losing economic growth. That is an absolute scandal.
I am sure that the Minister has read the report of the debate that I initiated in the House a few weeks ago. I suggested that a proper exchange rate at which the pound should enter the ERM would be DM2.6 in the middle of the band. I understand that the former Prime Minister, the right hon. Member for Old Bexley and Sidcup (Mr. Heath), who usually sits below the Gangway, has said that there should be a huge

devaluation. He talked about DM2·4. It certainly cannot be DM3. If that happens, I forecast with absolute certainty and confidence that either there will be a grave recession in Britain or within 12 months the Government will return to a policy of devaluation.
On the grounds that the Government have a silly inflationary policy, a silly high taxation policy and a lunatic exchange rate policy, we should all oppose the Government in the Lobby tonight.

Mr. Tim Smith: After that rather tiresome tirade from the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore), which had more to do with a modern version of "Through the Looking Glass" than anything else, I shall return to the Finance Bill.
My hon. Friend the Member for Eastbourne (Mr. Gow) said that, as we dealt with the Third Reading, we were approaching the end of the annual ritual which had started on Budget day. In fact, it starts much earlier than that because, soon, someone senior in the Inland Revenue will send out an internal memorandum asking members of staff to put forward suggestions for next year's Finance Bill. When my right hon. Friend the Chief Secretary has completed his difficult task of sorting out next year's public spending round, he will, in November, turn his attention to next year's Finance Bill. It is right to pay tribute to the work done by the Inland Revenue on the Finance Bill throughout the year and to my right hon. and hon. Friends on the Front Bench. A great deal of work goes into preparing the Finance Bill before the Budget sees the light of day.
When the Finance Bill was published it had 107 clauses, 16 schedules and ran to 156 pages. I was rather encouraged by that because, a few weeks previously, I had raised on the Adjournment the subject of tax simplification when I complained about the size of recent Finance Bills. This year's Bill is one of the smallest for some years, but since its publication it has, unfortunately, grown to 132 clauses, 19 schedules and 189 pages. I am sorry to say that, as a result of my efforts, we even added another clause yesterday on entertainers' expenses.
I do not for one moment suggest that the Government are entirely responsible for all the growth in tax legislation, but we should hold an inquiry into simplifying that legislation. Given its complicated nature, the time has now come to consider that. Complaints were rightly made in Committee about one of the schedules which was almost unintelligible.
I agree with my hon. Friend the Member for Ludlow (Mr. Gill) that we should be sceptical about introducing new tax reliefs because we should try all the time to broaden the tax base. I am glad that the number of new tax reliefs in the Bill is relatively insignificant. We should be aware that one man's tax relief is another man's tax increase. We should always be sceptical about introducing new reliefs.
The provisions that have been introduced in VAT will be of enormous help and will result in a much fairer system for VAT traders, especially because of the new arrangements for registration and bad debts. Previously I suggested that Customs and Excise had not done enough to publicise cash accounting to VAT traders and


I was glad to discover that a note was included in the VAT returns sent out recently to VAT traders to draw to their attention that if they notified Customs and Excise they could switch to cash accounting, which could be to their benefit.
I also welcome the provisions for charities, to which my hon. Friends have already drawn attention. The increase in allowances for payroll giving from £480 to £600 and the important changes made to encourage donations by individuals and companies are welcome. It is sometimes said that by introducing a new tax relief the Government suggest to people what they believe to be the right thing to do. Mortgage interest relief, for example, is designed to encourage owner-occupation. After all the changes that the Government have introduced in relation to charities no one need be in any doubt about what the Government hope to achieve. They should achieve their goal as a result of the substantial increases in charitable giving. In the past 10 years there have been similar substantial increases, but, by any standards, the changes introduced in the Bill are major and should greatly benefit charities.
I also welcome the changes designed to encourage further personal savings and the fact that TESSAs are designed to encourage those with the smallest amount to save. The abolition of composite rate tax will also help those people. Personal equity plans have been improved and I hope that my right hon. and hon. Friends will listen to some recent pleas to allow individuals to operate their own personal equity plan rather than having to go through a plan manager. If one truly believes in individual direct ownership of equities, that option should be available.
I also greatly welcome the increase in the premiums allowable for tax-exempt policies to friendly societies from £100 to £150 a year. That may not sound very much, but the policies are designed for the benefit of small savers—friendly societies have always helped such savers. In the next Session I hope that the Treasury will introduce a friendly societies Bill based upon the Green Paper that it published recently.
Clause 80 is also welcome because, in future, it will be possible for institutional investors to deal on the London International Financial Futures Exchange without fear of being taxed. That should lead to a large increase in business and ensure that LIFFE retains its predominant position as the leading market in Europe for futures and options.
Another change which will ensure that London remains an attractive place in which to do business is the abolition of stamp duty, which will ultimately benefit individuals whether their investments are made directly or through the institutions. I also welcome the undertaking that I received in Committee on the question of stamp duty on secondary market sovereign debt. I am glad that a new clause will be introduced next year to ensure that not just that business is done in London but the paperwork is done in London. At present, the business is done in London but all the paperwork is done in New York because of the fear that stamp duty may apply.
I welcome the change in the taxation of actors and the new clause. that was agreed to yesterday. As I explained then, it is a satisfactory compromise, although we shall want to keep an eye on how it works out.
Any Budget is a package, and this one has been an attractive package. Reference has been made to the groups to which it has been attractive. The House should support the Bill with enthusiasm.

Mr. Gerald Howarth: My hon. Friends have alluded to the cordial atmosphere that prevailed in Committee. It was broken on only one occasion, when I committed the folly of imagining that it was an occasion when a Back Bencher could address himself to some of the issues. Accordingly, I delivered myself of what I would describe not as a speech of extreme length but as one of modest length. I welcome this opportunity to carry on where I left off, but I shall not seize the opportunity, although I remain sceptical about the Government's view of clause 66, dealing with the restriction of tax relief on bad and doubtful sovereign risk debt.
For the benefit of the hon. Member for Newcastle upon Tyne, East (Mr. Brown), who was uncertain about the matter, and for the avoidance of doubt, I declare my interest as a consultant and a former employee of Standard Chartered bank. I hope that that will prevent him from having any more sleepless nights—as occurred on at least one occasion in Committee—on my account. Having been bitten once, I stayed away from the Committee for a while, and I shall not delay the House unduly today.
My hon. Friends have paid tribute to the Chancellor for the skilful way in which he introduced the Budget. It has not been an easy backdrop against which to introduce his first Budget, but he has managed in the circumstances to produce some attractive, innovative and interesting features which have appealed to hon. Members in all parts of the House.
The United Kingdom economy simply will not lie down. I see that in my constituency, in the manufacturing heartland of Britain, where there are companies manufacturing, among other things, sports boats, garden slides, and so on. Most of them tell me that they cannot push the stuff out of their doors fast enough. The economy is not in recession, and that in some ways is making the Chancellor's task more difficult. All that is needed to get the British economy going again is an indication that interest rates are just tipping downwards. That will lead to a burst of entrepreneurial enthusiasm—it is building up in the British economy—which will get things under way again.
Many features of the Budget have been welcomed by my hon. Friends, and I will not add to what they have said. It is only fair to say, however, that the Chancellor dealt with the question of capital limits, and the generous increase—from £8,000 to £16,000—has been widely welcomed, particularly by elderly people who put money aside during their working lives.
In terms of basic rate tax, it was a mark-time Budget. Over the years, we have achieved a steady reduction in the basic rate of taxation—not by great leaps and bounds, but by steady progress towards the present rates. I hope that my right hon. Friends will be able to resume the onward and downward march of taxation in the coming year.
If the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) wishes to pretend that the Labour party


is the party of low taxation, he will have to do something about his spending policies and those of his hon. Friends, who wish to burden the British taxpayer with a vast increase in taxation that will be unsustainable by the British people. My hon. Friends warmly welcome the conversion of at least one Opposition Member to the idea of low taxation. It shows that Conservative Members have been able to penetrate the thick skulls of at least some Opposition Members.
I wish to add my voice to those who have welcomed the abolition of stamp duty on share transactions. I should like there to be a system in this country such as that in Hong Kong, where one can look in the banks and see shares being traded in the window. I should like our banks to offer a similar facility in the United Kingdom so that we can have an easy share dealing operation here.
I am sorry that my amendment dealing with value added tax on gold was not accepted by the Government. It would have greatly benefited the United Kingdom and the gold bullion trade and our Britannia coin if we had been able to zero-rate gold coins. Some 18 months after VAT on gold coins was introduced in 1982, sales of those coins in the United Kingdom declined virtually to nil, and London has lost business to other financial centres, which is unfortunate. I appreciate the arguments that have been advanced by my hon. Friends in the Treasury, but I should like the Britannia coin to be tax free once more, so that something called the ecu and produced by the Belgians does not become more popular than the Britannia coin. An excellent advertisement in the 25 June edition of The House Magazine headed "Rule Britannia" demonstrated beyond peradventure why we should zero-rate our own excellent Britannia coin. With that message, I warmly endorse the Bill.

Mr. Ian Taylor: One of the great annual pleasures of Parliament is membership of the Finance Bill Committee. The highlight of that—which you, Mr. Speaker, will unfortunately be unable to share—is to take part in a Committee sitting opposite the Hale and Pace of the Labour party, the hon. Members for Islington, South and Finsbury (Mr. Smith) and for Newcastle upon Tyne, East (Mr. Brown). Year after year they come up with chirpy common sense. One of them has a good deal of Newcastle meat—or should I say, muscle—and the other often goes into flights of poetry and academic resonance, and remembers the massive tome—the 24 pages of Cornford in Microcosmographica Academica—in which he and I share a devout interest. It is the longest book that I have ever read and is, certainly, one that the hon. Member for Islington, South and Finsbury reads every night.
The highlights of the Finance Bill Committee are those evenings when, as the twilight descends on us, we know that we have some amusement ahead of us when the hon. Member for Newcastle upon Tyne, East still has another amendment to propose. I do not want to cause any problems for my two hon. Friends—I shall call them that and break tradition on this one occasion. They are so good in Finance Bill Committees that they should continue to

lead for the Opposition for many more years to come. I am sure that the electorate will endorse that at the next general election.
There is absolutely no doubt that the Bill has been part of a consistent strategy pursued by the Government. It is important to pay tribute to the ministerial team, particularly the Chief Secretary, who has combined, often behind the scenes, muscle and guidance to the Committee.
I must also mention the former Financial Secretary, whose performance in Committee obviously destined him for his subsequent stardom. The Economic Secretary took us through some highly technical points. There was no question but that they composed a formidable team, well capable of standing up to the Opposition spokesmen and their colleagues who are not present now.
I am particularly pleased about the main thrust of the Government's policy—their attempt to enable the enterprise society to create wealth, which gives this country more revenues which can be used to help those most in need. There are many elements in that process, and not all of them have to be done by the Government. Several hon. Members have referred to a range of policies designed to assist charitable giving. Too often we neglect the importance of the personal link between the donor of charitable aid and the voluntary organisation to which it is given. That often represents a personal commitment not only of a financial kind but to service to the community.
The Government are right to be proud of their record over several years of assisting charities. The largest 200 charities have doubled their income in recent years, and the Charities Aid Foundation and many other such bodies were delighted with the latest Budget initiatives. Perhaps this area of policy distinguishes us from Opposition Members, who still have a hankering for the state to do all the work. The voluntary organisations are important and we show our belief in their work by ensuring that people are helped and encouraged to give to charities, to covenant and to give as they earn. I am sorry that more hon. Members do not appear to take advantage of this last method of helping charities.
The release of entrepreneurial skills into the economy is the secret of this Government's success in transforming our country. We have created a vast new area of enterprise for many people in this country—that of small businesses. Despite high interest rates, there is a net growth in the number of small businesses of more than 1,000 a week. That says much for what we have achieved, and this Bill has contributed to small businesses' growth by simplyfing tax levels for them and giving them more encouragement. Many people throughout the country will be grateful for that; it underlines what the Government are trying to do—to enable people to have greater control over their own lives in the commercial and other sectors.
I pause to pay tribute to the Under-Secretary of State for Trade and Industry who has recently made several speeches in the City about the need for wider share ownership. The ownership of property is important to everyone, which is why, under successive Governments, the tax system has encouraged people to buy their own homes. It may be argued that that is a distorting element in the economy, but behind it lies a justifiable social desire to see people invest in houses, which gives them confidence, stability and a role in society. I believe that we should extend that principle to ownership of shares


in the companies for which people work. I know that I am not alone in this. The Government have done some work in this area, and I pay tribute to Opposition Members for their work on it in Committee and elsewhere; and to Liberal Members, who have had a long-term interest in it.
It is vital that people be given this interest, because, apart from living in a property, the most important other aspect of their lives is the work that they do, usually but not exclusively in a corporate organisation. A stake in the success of such a company brings with it more than the mere ownership of shares: it gives people a share in any increase in the company's capital—without destroying someone else's wealth to give them that capital. That is the beauty of shareholding. When the value of a company increases, everybody's stake in it rises in value and that gets away from the redistribution that was so often typified by Opposition policies. That is a constructive and worthwhile way to help people and give them the confidence that comes with an increasing amount of capital.
Secretaries in many of the companies that started share ownership schemes now have a capital stake in them that they could never have had before. Such a stake has given employees at all levels a better belief in the capitalist system and its importance and has also given them capital that they could not otherwise have expected.
The Bill encourages employee share ownership because it contains roll-over relief on capital gains tax for sales of shares by owners of a private company to an employee ownership trust. Hon. Members will agree that in previous Budgets the Government rightly made significant gestures to the employee share ownership movement. However, there was still not a level playing field and that was a disincentive for owners of private companies to sell to an employee trust. If they took the other route and sold for shares in a publicly quoted company, they could obtain roll-over relief. The issue caused considerable concern more than a year ago, and I pay tribute to the Chief Secretary for forcing through the regulations for roll-over relief. I hope that that will encourage many more advisers, practitioners and companies to make employee share ownership one of the dominant themes of the 1990s in the way that the pensions movement dominated previous decades.
Pensions are a diversified portfolio of mainly shares and are therefore immune from the risks that can arise from owning shares in the company in which one works. I should like to see employee share ownership operate alongside pensions because there is a direct relationship between effort in a company and the benefit that flows from that effort. In many cases there is opportunity for capital leverage. Roll-over relief is one of the major achievements of the Bill, and I hope that the Government will now take it further.
We have several successes on which to build, the most recent being the Companies Act 1989, and previous Finance Acts introduced important measures. We must ensure that any Government Department that is contemplating a share issue should have a significant element of employee share ownership, preferably in an employee share ownership trust. It should not just sell a few shares and offer no continuing structure.
The Bill had a successful ride in Committee and was well steered. It is a key part of the Government's overall policy on the economy. We want to see as many people as

possible participating in Britain's increasing wealth. The Bill achieves that, and I urge hon. Members to vote for its Third Reading.

Question put, That the Bill be now read the Third time:—

The House divided: Ayes 258, Noes 207.

Divison No. 299]
[9.59 pm


AYES


Alexander, Richard
Emery, Sir Peter


Alison, Rt Hon Michael
Evans, David (Welwyn Hatf'd)


Amos, Alan
Evennett, David


Arnold, Jacques (Gravesham)
Fairbairn, Sir Nicholas


Arnold, Sir Thomas
Fallon, Michael


Aspinwall, Jack
Favell, Tony


Atkins, Robert
Fenner, Dame Peggy


Atkinson, David
Field, Barry (Isle of Wight)


Baker, Rt Hon K. (Mole Valley)
Finsberg, Sir Geoffrey


Batiste, Spencer
Fishburn, John Dudley


Beaumont-Dark, Anthony
Fookes, Dame Janet


Bellingham, Henry
Forman, Nigel


Bennett, Nicholas (Pembroke)
Forsyth, Michael (Stirling)


Benyon, W.
Forth, Eric


Bevan, David Gilroy
Fowler, Rt Hon Sir Norman


Blackburn, Dr John G.
Fox, Sir Marcus


Blaker, Rt Hon Sir Peter
Franks, Cecil


Body, Sir Richard
Freeman, Roger


Bonsor, Sir Nicholas
French, Douglas


Boscawen, Hon Robert
Fry, Peter


Boswell, Tim
Gale, Roger


Bowden, A (Brighton K'pto'n)
Gardiner, George


Bowden, Gerald (Dulwich)
Garel-Jones, Tristan


Bowis, John
Gill, Christopher


Boyson, Rt Hon Dr Sir Rhodes
Glyn, Dr Sir Alan


Braine, Rt Hon Sir Bernard
Goodlad, Alastair


Brandon-Bravo, Martin
Goodson-Wickes, Dr Charles


Bright, Graham
Gorman, Mrs Teresa


Brooke, Rt Hon Peter
Gow, Ian


Brown, Michael (Brigg &amp; Cl't's)
Grant, Sir Anthony (CambsSW)


Bruce, Ian (Dorset South)
Greenway, Harry (Ealing N)


Buchanan-Smith, Rt Hon Alick
Greenway, John (Ryedale)


Buck, Sir Antony
Gregory, Conal


Budgen, Nicholas
Griffiths, Peter (Portsmouth N)


Burns, Simon
Grist, Ian


Burt, Alistair
Grylls, Michael


Butcher, John
Hague, William


Butler, Chris
Hamilton, Hon Archie (Epsom)


Butterfill, John
Hamilton, Neil (Tatton)


Carlisle, John, (Luton N)
Hampson, Dr Keith


Carlisle, Kenneth (Lincoln)
Hannam, John


Carrington, Matthew
Hargreaves, Ken (Hyndburn)


Carttiss, Michael
Harris, David


Cash, William
Haselhurst, Alan


Chapman, Sydney
Hawkins, Christopher


Chope, Christopher
Hayes, Jerry


Clark, Dr Michael (Rochford)
Hayhoe, Rt Hon Sir Barney


Clark, Sir W. (Croydon S)
Hayward, Robert


Clarke, Rt Hon K. (Rushcliffe)
Heathcoat-Amory, David


Conway, Derek
Hicks, Robert (Cornwall SE)


Coombs, Anthony (Wyre F'rest)
Higgins, Rt Hon Terence L.


Couchman, James
Hill, James


Cran, James
Hind, Kenneth


Critchley, Julian
Hogg, Hon Douglas (Gr'th'm)


Currie, Mrs Edwina
Hordern, Sir Peter


Curry, David
Howard, Rt Hon Michael


Davies, Q. (Stamf'd &amp; Spald'g)
Howarth, G. (Cannock &amp; B'wd)


Davis, David (Boothferry)
Howell, Rt Hon David (G'dford)


Day, Stephen
Howell, Ralph (North Norfolk)


Devlin, Tim
Hughes, Robert G. (Harrow W)


Dickens, Geoffrey
Hunter, Andrew


Dicks, Terry
Irvine, Michael


Dorrell, Stephen
Irving, Sir Charles


Douglas-Hamilton, Lord James
Jack, Michael


Dover, Den
Janman, Tim


Dunn, Bob
Jessel, Toby


Durant, Tony
Johnson Smith, Sir Geoffrey


Eggar, Tim
Jones, Gwilym (Cardiff N)






Jones, Robert B (Herts W)
Shaw, David (Dover)


Jopling, Rt Hon Michael
Shaw, Sir Giles (Pudsey)


Key, Robert
Shaw, Sir Michael (Scarb')


Kilfedder, James
Shelton, Sir William


King, Roger (B'ham N'thfield)
Shephard, Mrs G. (Norfolk SW)


Knapman, Roger
Shepherd, Colin (Hereford)


Knight, Greg (Derby North)
Shepherd, Richard (Aldridge)


Knowles, Michael
Sims, Roger


Knox, David
Skeet, Sir Trevor


Lamont, Rt Hon Norman
Smith, Tim (Beaconsfield)


Lang, Ian
Soames, Hon Nicholas


Lawrence, Ivan
Speller, Tony


Lee, John (Pendle)
Spicer, Sir Jim (Dorset W)


Leigh, Edward (Gainsbor'gh)
Spicer, Michael (S Worcs)


Lester, Jim (Broxtowe)
Squire, Robin


Lightbown, David
Stanbrook, Ivor


Lilley, Peter
Stanley, Rt Hon Sir John


Lloyd, Sir Ian (Havant)
Steen, Anthony


Lloyd, Peter (Fareham)
Stern, Michael


Lord, Michael
Stevens, Lewis


McCrindle, Robert
Stewart, Allan (Eastwood)


Macfarlane, Sir Neil
Stewart, Andy (Sherwood)


MacGregor, Rt Hon John
Stewart, Rt Hon Ian (Herts N)


MacKay, Andrew (E Berkshire)
Stradling Thomas, Sir John


Maclean, David
Sumberg, David


McLoughlin, Patrick
Summerson, Hugo


McNair-Wilson, Sir Patrick
Taylor, Ian (Esher)


Madel, David
Taylor, John M (Solihull)


Major, Rt Hon John
Taylor, Teddy (S'end E)


Malins, Humfrey
Tebbit, Rt Hon Norman


Mans, Keith
Temple-Morris, Peter


Maples, John
Thompson, D. (Calder Valley)


Marland, Paul
Thompson, Patrick (Norwich N)


Marshall, John (Hendon S)
Thorne, Neil


Marshall, Sir Michael (Arundel)
Thornton, Malcolm


Martin, David (Portsmouth S)
Townend, John (Bridlington)


Mates, Michael
Tracey, Richard


Maude, Hon Francis
Tredinnick, David


Mawhinney, Dr Brian
Twinn, Dr Ian


Maxwell-Hyslop, Robin
Walden, George


Mayhew, Rt Hon Sir Patrick
Walker, Bill (T'side North)


Meyer, Sir Anthony
Waller, Gary


Miscampbell, Norman
Ward, John


Mitchell, Andrew (Gedling)
Wardle, Charles (Bexhill)


Monro, Sir Hector
Warren, Kenneth


Montgomery, Sir Fergus
Watts, John


Moss, Malcolm
Wells, Bowen


Mudd, David
Wheeler, Sir John


Nelson, Anthony
Whitney, Ray


Nicholls, Patrick
Widdecombe, Ann


Nicholson, David (Taunton)
Wiggin, Jerry


Parkinson, Rt Hon Cecil
Wilkinson, John


Patnick, Irvine
Wilshire, David


Raffan, Keith
Winterton, Mrs Ann


Renton, Rt Hon Tim
Winterton, Nicholas


Riddick, Graham
Wood, Timothy


Ridsdale, Sir Julian
Woodcock, Dr. Mike


Rifkind, Rt Hon Malcolm
Young, Sir George (Acton)


Roberts, Sir Wyn (Conwy)
Younger, Rt Hon George


Rossi, Sir Hugh



Rowe, Andrew
Tellers for the Ayes:


Rumbold, Mrs Angela
Mr. Tom Sackville and


Ryder, Richard
Mr. Nicholas Baker.




NOES


Allen, Graham
Blunkett, David


Archer, Rt Hon Peter
Boateng, Paul


Armstrong, Hilary
Boyes, Roland


Ashdown, Rt Hon Paddy
Bradley, Keith


Ashley, Rt Hon Jack
Bray, Dr Jeremy


Ashton, Joe
Brown, Gordon (D'mline E)


Barnes, Harry (Derbyshire NE)
Brown, Nicholas (Newcastle E)


Barron, Kevin
Brown, Ron (Edinburgh Leith)


Beckett, Margaret
Bruce, Malcolm (Gordon)


Beith, A. J.
Buckley, George J.


Bell, Stuart
Caborn, Richard


Benn, Rt Hon Tony
Callaghan, Jim


Bennett, A. F. (D'nt'n &amp; R'dish)
Campbell, Menzies (Fife NE)


Bermingham, Gerald
Campbell, Ron (Blyth Valley)


Bidwell, Sydney
Campbell-Savours, D. N.





Canavan, Dennis
Lamond, James


Carlile, Alex (Mont'g)
Leighton, Ron


Carr, Michael
Litherland, Robert


Clark, Dr David (S Shields)
Livsey, Richard


Clarke, Tom (Monklands W)
Lloyd, Tony (Stretford)


Clelland, David
McAllion, John


Clwyd, Mrs Ann
McAvoy, Thomas


Cohen, Harry
McCartney, Ian


Cook, Frank (Stockton N)
Macdonald, Calum A.


Corbett, Robin
McFall, John


Cousins, Jim
McKelvey, William


Crowther, Stan
McLeish, Henry


Cryer, Bob
Maclennan, Robert


Cummings, John
McNamara, Kevin


Cunliffe, Lawrence
McWilliam, John


Cunningham, Dr John
Madden, Max


Dalyell, Tam
Mahon, Mrs Alice


Darling, Alistair
Marek, Dr John


Davies, Rt Hon Denzil (Llanelli)
Marshall, David (Shettleston)


Davies, Ron (Caerphilly)
Marshall, Jim (Leicester S)


Davis, Terry (B'ham Hodge H'l)
Martin, Michael J. (Springburn)


Dewar, Donald
Martlew, Eric


Dixon, Don
Maxton, John


Dobson, Frank
Meacher, Michael


Doran, Frank
Meale, Alan


Duffy, A. E. P.
Michael, Alun


Dunnachie, Jimmy
Michie, Bill (Sheffield Heeley)


Dunwoody, Hon Mrs Gwyneth
Michie, Mrs Ray (Arg'l &amp; Bute)


Eadie, Alexander
Mitchell, Austin (G't Grimsby)


Eastham, Ken
Moonie, Dr Lewis


Evans, John (St Helens N)
Morgan, Rhodri


Ewing, Harry (Falkirk E)
Morley, Elliot


Ewing, Mrs Margaret (Moray)
Morris, Rt Hon A. (W'shawe)


Fatchett, Derek
Morris, Rt Hon J. (Aberavon)


Faulds, Andrew
Mullin, Chris


Field, Frank (Birkenhead)
Murphy, Paul


Fields, Terry (L'pool B G'n)
Nellist, Dave


Fisher, Mark
Oakes, Rt Hon Gordon


Flannery, Martin
O'Brien, William


Flynn, Paul
O'Neill, Martin


Foot, Rt Hon Michael
Orme, Rt Hon Stanley


Foster, Derek
Parry, Robert


Foulkes, George
Patchett, Terry


Fraser, John
Pendry, Tom


Fyfe, Maria
Pike, Peter L.


Galloway, George
Powell, Ray (Ogmore)


Garrett, John (Norwich South)
Prescott, John


Garrett, Ted (Wallsend)
Primarolo, Dawn


George, Bruce
Quin, Ms Joyce


Gilbert, Rt Hon Dr John
Radice, Giles


Godman, Dr Norman A.
Randall, Stuart


Golding, Mrs Llin
Redmond, Martin


Gordon, Mildred
Rees, Rt Hon Merlyn


Gould, Bryan
Reid, Dr John


Graham, Thomas
Richardson, Jo


Grant, Bernie (Tottenham)
Robinson, Geoffrey


Griffiths, Nigel (Edinburgh S)
Rogers, Allan


Griffiths, Win (Bridgend)
Rooker, Jeff


Hardy, Peter
Ross, Ernie (Dundee W)


Harman, Ms Harriet
Rowlands, Ted


Hattersley, Rt Hon Roy
Ruddock, Joan


Heal, Mrs Sylvia
Salmond, Alex


Henderson, Doug
Sedgemore, Brian


Hinchliffe, David
Sheerman, Barry


Hogg, N. (C'nauld &amp; Kilsyth)
Sheldon, Rt Hon Robert


Home Robertson, John
Shore, Rt Hon Peter


Hood, Jimmy
Short, Clare


Howarth, George (Knowsley N)
Skinner, Dennis


Howell, Rt Hon D. (S'heath)
Smith, Andrew (Oxford E)


Howells, Geraint
Smith, C. (Isl'ton &amp; F'bury)


Hoyle, Doug
Smith, J. P. (Vale of Glam)


Hughes, John (Coventry NE)
Snape, Peter


Hughes, Robert (Aberdeen N)
Soley, Clive


Hughes, Roy (Newport E)
Spearing, Nigel


Hughes, Simon (Southwark)
Steel, Rt Hon Sir David


Jones, Barry (Alyn &amp; Deeside)
Steinberg, Gerry


Jones, Ieuan (Ynys Môn)
Stott, Roger


Jones, Martyn (Clwyd S W)
Strang, Gavin


Kirkwood, Archy
Straw, Jack


Lambie, David
Taylor, Mrs Ann (Dewsbury)






Taylor, Matthew (Truro)
Welsh, Andrew (Angus E)


Thomas, Dr Dafydd Elis
Welsh, Michael (Doncaster N)


Turner, Dennis
Wigley, Dafydd


Wallace, James
Williams, Rt Hon Alan


Wardell, Gareth (Gower)
Williams, Alan W. (Carm'then)


Wareing, Robert N.
Wilson, Brian


Watson, Mike (Glasgow, C)
Winnick, David





Wise, Mrs Audrey
Tellers for the Noes:


Worthington, Tony
Mr. Frank Haynes and


Young, David (Bolton SE)
Mr. Allen MacKay.

Question accordingly agreed to.

Bill read the Third time, and passed.

Housing

Mr. Clive Soley: I beg to move,
That an humble Address be presented to Her Majesty, praying that the Housing Renovation etc. Grants (Reduction of Grant) Regulations 1990 (S.I., 1990, No. 1189), dated 5th June 1990, a copy of which was laid before this House on 8th June, be annulled.
Perhaps it will be convenient to take at the same time the motion
That an humble Address be presented to Her Majesty, praying that the Housing Renovation etc. Grants (Prescribed Forms and Particulars) Regulations 1990 (S.I., 1990, No. 1236) dated 12th June 1990, a copy of which was laid before this House on 14th June, be annulled.

Mr. Bob Cryer: On a point of order, Mr. Speaker. The notification on the Order Paper that the Joint Committee on Statutory Instruments has not yet completed its consideration of the instrument is not accurate. The Committee completed its consideration today and has placed in the Vote Office a copy of its report, approved by the Committee today, together with the Department's memorandum. We have reported the instrument to the House on the ground of defective drafting.

Mr. Speaker: I thank the Chairman of the Select Committee very much for that information. I am sure that it is valuable to the House.

Mr. Soley: The information will be valuable because I want to refer to the point that my hon. Friend the Member for Bradford, South (Mr. Cryer) has just raised.
The 24th report of the Joint Committee on Statutory Instruments made much criticism of the grant order. One should bear in mind the fact that it arises from the Local Government and Housing Act 1989—a measure which, in its own right, caused enormous problems for the House and which was badly drafted. We now have a statutory instrument arising from that Bill—now an Act of Parliament—which is itself badly drafted.
The instrument was drafted by the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley), who was previously Secretary of State for Trade and Industry and before that Secretary of State for the Environment. I can only assume that he drafted the instrument himself because it was his habit to draft Bills and statutory instruments. When the right hon. Gentleman drafted this instrument, he must have been dwelling on the outcome of the second world war because it is the only way in which one can account for some of the absurdities to which the Joint Committee on Statutory Instruments has drawn attention.
Some of the defects in the drafting will cause only relatively—I emphasise that word—minor problems to the public and to local authorities. However, there are enough unusual cases to cause considerable concern. What does the claimant do who makes a claim for a grant, but who is then told that the definition—or the interpretation by the local authority—does not accord with what he understands to be the case from the order itself? Presumably he has to go to law. We know from what the Statutory Instruments Committee has said that there is sufficient imprecision about the drafting to almost

welcome legal cases. That means that an individual claimant has to take out a case himself with all the time, trouble and expense that that involves.
One of the most disconcerting aspects of the drafting is the reference to "voluntary body" or "voluntary organisation". When we debated this in Committee we all thought that we knew what type of organisation we were talking about. It transpires from a Department of the Environment answer to the Select Committee that "voluntary body" or "voluntary organisation" can include commercial organisations. The answer said that it does not "exclude" commercial organisations, so they must be included. That will cause considerable confusion and difficulty when people are deciding what grant level someone is eligible for.
There will also be problems over the definition of student grants and the difference between earnings and income. That was another point made by the Statutory Instruments Committee. The definition of a deed of covenant is perhaps the most clear-cut legal case. In many instances the deeds of covenant will be legally enforceable and will, therefore, determine what the income or earnings are. In those circumstances, the Department of the Environment seems to take the view that it need simply leave the matter to the discretion of the local authority. How on earth can a local authority have discretion over something decided by a court of law? If a local authority wants to avoid paying a grant, it can use its discretion and refuse to provide it. In such a case, the claimant would have to go to court. He would probably win his case, but the time and expense involved would make it more likely that many claimants would not pursue their request for a grant.
As I said, the statutory instrument arises out of the Local Government and Housing Act 1989. In the debates on that Bill the Minister gave assurances about means testing and the fact that the Government were introducing a better system for home improvement grants. I admit to the Minister that it is better as it can provide grants of up to 100 per cent. That is welcome. I was going to say that the Minister has gone badly wrong, but it would be difficult to interpret it as such. In fact, he has gone intentionally wrong by limiting the number of people who can receive such a grant much more drastically than in the past. I do not believe that it is an accident that we had Government speaker after Government speaker during the debate on the Finance Bill in order to prevent us from reaching this debate before 10 o'clock. What we are debating now will affect many hundreds of thousands or possibly millions of people who would previously have received grants to repair their houses but who will no longer receive one or will receive a reduced amount. That is a matter of serious concern.
The statutory instrument is drafted in such a way that the means test will ensure that people on relatively modest incomes and low incomes will have less opportunity for repair and renovation of their housing. People on higher incomes will also have less opportunity.
The Government's own housing conditions survey of 1986 pointed out that 500,000 properties in Britain lack basic amenities, 1 million were unfit—about 5.6 per cent. of the total housing stock—and 1.1 million were in serious disrepair. I again pray in aid my old friends and supporting colleagues, the Association of District Councils. It is a Conservative-controlled body, but it is constantly pointing out that the Government's lack of a


housing strategy is leading to a declining state of repair of the British housing stock. That is why it says that a minimum of £35 billion and a maximum of £50 billion must be spent by the end of the century if the problem is not to escalate. The housing conditions survey, the ADC—a Conservative-controlled body—and other Conservative-controlled organisations, as well as the Labour party and almost every housing organisation in the country, are telling the Government that they have got it wrong. If the Government do not want the housing stock in Britain to continue to decline, they should take the regulations away and draft them properly. They should ensure not only that the regulations do not contain the contradictions to which the Joint Committee on Statutory Instruments drew attention but that people can obtain grants so that the state of the housing stock in Britain can be improved.
The way in which the Government have fixed the contributions means that people on low and modest incomes will have to make larger contributions than expected. That means that many people will not take up the grant. That is why I say that the number of people who obtain grants and go ahead with repairs will drop.
The Government should look again at regulation 8 and increase the figure from £20 to a minimum of £40—preferably to £60. Those figures have been calculated not just by me but by many other people. If we set the level at £60, we could prevent the housing stock from slipping into further disrepair. If the figure is below £60, the most that we shall manage to do is to mark time and to ensure that matters do not get any worse. If the figure is left at £20, the housing stock will get worse. Without going into the complicated details of the way in which the system works, I should explain that the £20 acts as a multiplier for the amount that one can obtain.
Let us take the example of a family with a net income of £8,000. Under the old regulations, which expired on 30 June this year, that family would have received a 75 per cent. grant in respect of repair costs of £8,000. From 1 July, the same family will find its grant reduced from 75 per cent. to about 53 per cent. That family will get considerably less than it would have received under the old regime which ended a few weeks ago.
Families with incomes of between £10,000 and £12,800 will receive only 1 per cent. grant in respect of a repair bill of £8,000. Are the Government seriously asking the House and the public to accept that family incomes of between £10,000 and £12,800 are sufficient to enable people to find repair costs—particularly in the south of Britain, where repairs are especially expensive—on the basis of a 1 per cent. grant? That is nonsense and the Government must know it.
The Government must also know that that will lead to a reduction in the number of repairs being done. It is not that the Government want fewer repairs to be done. They want to spend less money, but in doing that they will exacerbate the state of disrepair of the British housing stock, which will not only add to the misery of people in bad housing but will increase the bill in future. The Government's neglect of the railway and sewerage systems and the rest of the infrastructure in Britain has led to a similar decline.
A single parent would get a 100 per cent. grant on a £10,000 repair only if his or her income was below £93 a week, and no assistance whatever if he or she earned more than £191 a week. A single person without a child would

receive a 100 per cent. grant only if his or her income was below £50 a week. That is a further indication that the Government are not serious about the disrepair of our housing stock. The £20 figure in regulation 8 needs to be set at £60 if we are to reverse the deterioration of our housing stock.
My next point concerns the savings disregard—the amount of savings that people may have without losing grant. The means test is a big let-down, not only on the Government's proposal in the Local Government and Housing Act 1989 but on some of the commitments that they gave both to the House of Lords and to this House. During our debates on the 1989 Act, the Minister suggested that there could be a passport. In other words, if one was getting certain other state benefits and one's savings had already been taken into account, the assumption could be carried over to grants and so on; the savings disregard would be equal. But instead of sticking to that and keeping the figures the same, the Government changed them yet again. We now have a savings disregard of £8,000 for people on income support or family credit; of £16,000 for those on poll tax or housing benefit; and, now, of £5,000 for the purposes of the statutory instrument. That is despite the fact that, in Committee and in the House of Lords, the Government gave a commitment to ensure that there was passporting of a similar type to ensure that the savings disregard was kept as compatible as possible with the other benefits to make it simple.

The Parliamentary Under-Secretary of State for the Environment (Mr. Christopher Chope): I hope that the hon. Gentleman agrees that the new disregards are more generous, because they have no upper limit and the minimum disregard is £5,000.

Mr. Soley: I know that the minimum is £5,000. But if the Minister is to be consistent with what was said in Committee, he must operate the same limit as those applying to housing and poll tax benefits.
The Minister cannot say that he is going to keep it the same for the various benefits, and then, a year or so later, change it. That is what the Government have done. We were told in Committee—on the Floor of the House—that means testing would be simple and comparable with other benefits. It is not; it is quite complex. Does the Minister argue that it is a simple system now? Perhaps he will address that question in his speech.
Additional premiums are allowed for the disabled and for those over 75. However, that will be affected by the basic means test. It should be remembered that the House of Lords passed that part of the primary legislation only on the basis of Government assurances that means testing would be simple and comparable. The Minister has a duty to both Houses to clarify the matter.
I am also disappointed that the home insulation grant is to be discretionary. The Government made an amazing commitment some time ago, and only a few weeks ago the Secretary of State for the Environment emphasised again, on the Floor of the House, that Britain would reduce its CO2 emissions. Here was an opportunity to do that, and to increase expenditure on the insulation of homes. That would save energy, reduce fuel prices and often enable people to have more disposable income, thus benefiting them, the country and the environment.
With the poll tax and Government cuts, local authorities will find it difficult to give discretionary grants.


They will fulfil their commitment on the mandatory grants and then squeeze the discretionary grants as much as possible, not because it is in the interests of local authorities—whether Tory or Labour—but because they have no option. The alternative would be to allow the poll tax to go up again. That is the only way to pay for the grant. So much for the green credentials of the Secretary of State for the Environment.
When we compare British housing stock to that of many European countries on a similar latitude, we find that they spend much more and make a greater effort to insulate homes than we do. As a result, they have better energy savings returns that enable people on lower incomes to spend less on energy. That is of benefit to everyone. The Government's green credentials and their commitment to improve housing have suddenly begun to look a bit shaky.
I also want specifically to know what on earth we are to do about the weird time warp in which the Government have put local authorities and individuals. The old system will come to an end on 31 July, and this instrument will not come into effect for a while. For some months, people who have had emergency work to be done have got reports from surveyors saying that such work must be done immediately because, if it is not, the problem will get worse. I refer to problems such as dry rot and other things that spread rapidly in houses. Those people have gone to their local authorities and asked for a grant. Local authorities have then said, "We shall file your claim, but we cannot do anything about it because we do not know what the rules are, and we shall not know what the rules are for some time."

Mr. Ian McCartney: On 1 December last year I wrote to the Secretary of State about that matter. The Under-Secretary of State replied refusing to meet me on that point on the basis that his Department had written to my local authority giving an explanation of why changes were taking place in regard to funding for this financial year. When I saw a copy of the minutes of the discussions between the Department and my local authority it became clear that the Government had been dishonest about their intentions about the resources being provided for this financial year. He still refused to meet me to discuss the requirements of and resources for local authorities. Will my hon. Friend ask the Secretary of State why he has refused to meet Opposition Members to discuss investment in local authority contributions to the private sector and upgrading houses in the private sector while he is reducing grants to local authorities on this issue?

Mr. Soley: My hon. Friend makes an important point. It might not have escaped his notice that we have had six or seven Ministers with responsibility for housing matters in the past five years. I am beginning to lose count of them. The present Minister, I am told, will not be with the Department much longer. One of the things that strikes me when I raise such issues and examine the answers that are given is the way in which Ministers abuse the parliamentary process by refusing not just to meet hon. Members but to give clear answers to questions. Without straying out of order, the most obvious example arose during the Housing Corporation crisis. Ministers refused

to give figures for the next three years, even though they were obviously wrong in the Department of the Environment's expenditure White Paper.
The issue is serious. People are caught in a time warp. A local authority cannot give a grant, but, more important, it is doubly trapped. It might want to give a grant and might consider that a person was entitled to it, but, unless it can approve the work in accordance with the terms of the statutory instrument, it cannot give the go-ahead. Will the Minister allow some retrospection so that local authorities will be able to assess properly audited receipts and people who could not get a local authority grant because there is no legislation covering it can do emergency work, and allow local authorities to use their discretion and give grants, particularly mandatory grants, in such circumstances?
The matter is important. It will affect many people, in particular those who have work which needs to be done urgently and which a surveyor has said must be done urgently. I accept that that would have to be part of the evidence presented to a local authority.
An important matter for many people and for the housing stock generally is who pays. The Government are anxious to squeeze the grant system so that it spends less money, because the only way in which a local authority can pay for housing repairs and renovation is the poll tax. Local authorities will squeeze discretionary grants to keep down the poll tax, and they will give mandatory grants because they have no option. That means that matters such as energy conservation will be pushed aside as being marginal and of no great consequence, whereas they should be much more central to the Government's strategy.
We know that the Government are in financial difficulty, not just in terms of running the economy but in getting themselves out of the poll tax trap. There is no excuse whatsoever for putting on to local authorities the responsibility for getting the Government out of that mess.
The Government need to ensure that we have a grant system that improves the repair and renovation of British housing stock so that it does not continue to decline in the way in which many Conservative Members, as well as many local authorities, have been telling the Minister for years that it is declining. The Government need to do something about that today because the decline will continue until the Minister reverses these policies.

Mr. Bob Cryer: As I said in my earlier point of order, Mr. Speaker, the Joint Committee on Statutory Instruments has reported the instrument to the House on the grounds of defective drafting. Although I propose to deal with this matter as quickly as possible, it is important that the House should recognise that the majority of the Government's vast legislative programme is being dealt with by means of subordinate legislation.
The House should also recognise that the Government, who claimed that they would take legislation off the citizens' backs, are producing more statutory instruments of one sort or another than the previous Labour Government. About 2,500 statutory instruments are being progressed through the House every year because of the way in which the Government are producing more


regulations, rather than fewer. In itself, that is not a bad thing, but it shows that the Government's claim to be taking regulations away is simply not true.
It is also important that the Government should try, to the best of their ability—and they certainly have a great number of resources on which to call—to make legislation as clear as possible. It is worth recalling that this is a negative procedure instrument which would not have been debated but for the Opposition prayer. That seems a less than satisfactory way of dealing with this matter.

Mr. Chope: Does the hon. Gentleman accept that the drafting of this instrument, in the areas that have been criticised by the Joint Committee on Statutory Instruments, is absolutely identical to the drafting of the Housing Benefit (General) Regulations 1987 which went through without any such comment and criticism from the Committee?

Mr. Cryer: I do not deny the possibility that the Committee has overlooked defects in other instruments. The Committee deals with the vast majority of the 2,500 or more statutory instruments presented to Parliament every year and I have no doubt that some defects are overlooked. Departments often argue that wording which we claim is defective has been used previously, but that is no argument in justification of the existing statutory instrument. If the Minister wants to make a criticism, it is a criticism of past Committees that have overlooked defective wording.
The Committee must take its guidance from the Counsel to you, Mr. Speaker, who is also Counsel to the Committee. If the Counsel or a member of the Committee finds that an instrument is defective in one respect, and it follows another instrument, I should have thought that the Committee was to be commended, not criticised. The Committee is quite open in saying, "Yes, we need all the help that we can get." We must recognise that the Committee meets weekly at 4.15 pm. with just one Counsel and an assistant to help it. We should have more resources, not less."
Many instruments are corrected without ever having been reported to the House because Counsel to the Committee contacts Departments to point out defects. Helpful Departments frequently say, "All right, we will withdraw the instrument—we recognise the defects and we will remedy them." I shall return to that point in a moment.

Mr. James Lamond: I am following my hon. Friend's argument as closely as possible. Is he saying that his Committee has before it on average between 60 and 70 statutory instruments at every meeting?

Mr. Cryer: Yes, that is absolutely correct. For example, after the recess we shall have more than 100 instruments before us. They will have accumulated during the recess. We agreed only today to meet on the first Tuesday we are back so as to avoid a backlog building up. We recognise that it is difficult for the Committee to take all the instruments into account. If it is difficult for the Committee, it is also difficult for the ordinary citizen. A copy of the statutory instrument with which we are dealing today costs £5.15. That does not exactly encourage the dissemination of information affecting citizens. It runs to some 35 pages, including three schedules and many

clauses. Without any shadow of doubt it is a complicated piece of legislation equivalent to a primary Act of Parliament. All that the Committee is saying is that several matters require elucidation. That is why we have reported it to the House.
Whether the people who use the instrument will receive the guidance from the Joint Committee on Statutory Instruments is in doubt. Perhaps as a gesture and to help people at large the Minister will agree to publish and distribute all the Committee's comments with the instrument. I have no doubt that the Minister will be keen to make a suitable response.
The report lists seven areas in which the drafting is defective. I shall not go through them all. The report is available. It was dealt with by the Committee today. We discussed it so that we could put it in the Vote Office for Members to obtain and read. For example, in the first paragraph of our report we refer to the definition of a voluntary body and a voluntary organisation. Regulation 4(2)(f) in the instrument says:
This paragraph applies to— …
(f) a person who lives with the relevant person in order to care for him or a partner of his and who is engaged by a charitable or voluntary body (other than a public or local authority)".
The Department says that a voluntary body includes an ordinary commercial company or, at least, does not exclude such a company. The Department also says that the expressions
properly bear their ordinary meaning".
We say that it is impossible to reconcile an ordinary commercial body with a voluntary body or organisation. Those are confusing matters for the people in local authorities who will have to use the instruments. They will have to decide who are qualifying persons. There is a real possibility that where the definition is cloudy it will be referred to a court. That is a defect in Parliament. If we allow shoddy legislation through, whether primary or delegated legislation, which has to be decided in the courts because it is defective, we shall hand over the power of decision-making to the courts. That is not what we were elected for.
Regulation 16(2) refers to
income derived under regulations 27 and 28".
As no income can be derived under a regulation of a statutory instrument, we have drawn the attention of the House to the matter. The Department has said that it will consider the wording at the first convenient opportunity. That means that it will amend the wording in a further statutory instrument—at least, one hopes that it will—when it finds a statutory instrument which can be linked with this one in the index. That means that people will have to buy another instrument and to know the indexing in order to link it up to find the new definition. That illustrates the difficulties for ordinary people and for local authorities who use the instruments that the Government produce.
How can payments under a legally enforceable deed of covenant be treated under paragraph 13 of schedule 3 as a voluntary payment? The Department has suggested that that is reconcilable, but the Committee believes that it is doubtful that a legally enforceable deed of covenant can be regarded as voluntary. Local authorities will be called upon to decide whether compulsory payments are voluntary, but that is a complete opposite in terms and it will be a difficult task for a local authority to undertake.


That might also lead to a challenge in the courts, which would be a waste of everyone's time and money when we could get things right in the first place.
The Minister should consider an amending instrument to remedy the seven poor definitions, which were badly drafted in the original statutory instrument. The Committee has an obligation to report items in any instrument that it regards as badly drafted. Although the seven badly drafted definitions may make up only a small proportion of the instrument and only a small proportion of the users of the instrument will come up against them, it is worth the Department considering an amending instrument to cover those seven items. That instrument should be available free to the purchasers of the primary instrument, for which they will pay £5.15.
I have not mentioned the merits of the instrument because our Committee does not consider the merits of statutory instruments and therefore I have not gone outside the Committee's remit. Of course we want to see housing renovation carried out. That is the purpose of the housing renovation system, particularly as a large part of the stock consists of older dwellings which fall within the definition of those eligible for housing renovation grants. That is important. It is therefore also important that the legislation which defines such eligibility should be clear, succinct and transparently available to the user as well as to Ministers, hon. Members and draftsmen in the Department.
The user should see the statutory instrument not as an obstacle, but as the means of obtaining a benefit which, if it improves the housing stock, is a benefit to the nation. It is not unreasonable to ask the Minister to consider providing an amending instrument to clarify and improve the statutory instrument for free issue with it.

Mr. Robert G. Hughes: I am sure that we are all extremely grateful to the hon. Member for Bradford, South (Mr. Cryer) and his Committee for the detailed work they have undertaken. It is vital that the drafting of any legislation is right. I do not think that any of us would pretend that, over the years, all the drafting of housing legislation has been as good as we wanted. I am therefore grateful to the hon. Gentleman and his Committee.
The hon. Gentleman said that the Committee was not against the introduction of such statutory instruments because we need to get on with paying improvement grants, and that is why I shall join my hon. Friends in the Lobby to support the statutory instrument. It is important that the improved scheme operates so that people can see the benefits that derive from it.
The hon. Member for Hammersmith (Mr. Soley) gave one of his normal Armageddon speeches. I just hope that he is more cheerful when he gets home as he is so downbeat when he is at the Dispatch Box. In fairness to the hon. Gentleman, tonight was a little different from the previous debate on housing because, unlike his hon. Friend the Member for Dagenham (Mr. Gould), at least he knows what he is talking about.
If, according to the hon. Member for Hammersmith, things are bad now, will he say how bad they were during the lifetime of the last Labour Government? Spending on

improvement grants in the last full year of Labour rule was £76 million. In the most recent full year for which we have figures, 1989, £328 million was spent on such grants, representing a 50 per cent. increase above inflation. If the hon. Gentleman wishes to be fair, he will not claim that we wish to reduce the amount spent on improvement grants.

Mr. Jeff Rooker: The vastly greater slum clearance and house building programmes operated by the last Labour Government meant that the priority for house renovation was not as great as it is now, when the Government are not clearing slums and building new houses.

Mr. Hughes: As the saying goes, if you believe that you will believe anything. Opposition Members constantly argue, whatever the subject, that the last Labour Government wanted to spend more but could not do so because there was another priority.

Mr. Peter L. Pike: If the hon. Gentleman wishes to be fair, will he accept that the most generous system that the Conservatives operated occurred in 1982, in the run-up to the 1983 general election, when there was a grants bonanza, which was brought to an end immediately the Conservatives won that election?

Mr. Hughes: Elections come and go—[Interruption.]—and if the hon. Gentleman will contain himself, another election will happen in due course and we will see what happens in the run-up to that.
In 11 years, we have spent about £4 billion on home improvements. That is the Conservative record and we can be proud of it. The system before us is more generous than the previous one, although there will be two grants subject to a test of resources, being renovation grants and disabled facilities grants. By that means we shall be directing help to those who are least able to pay for the work to be done.
We are discussing a controversial subject. When we debated the changes to the system, when the measure was proceeding through Parliament, various arguments were adduced. Some people seem to find it hard to accept, even though we know it to be the case, that too much of the money spent by the Government in recent years on improvement grants went to people who could have afforded to pay for the work themselves. Many people with higher than average incomes received grants, renovated houses and flats and made a profit on them. I do not complain about that, because it was the system, but we want to direct help to where it is needed.
Many people cannot afford to pay for renovation work, and it is wrong for the hon. Member for Hammersmith to suggest that the grants should be available to everybody. In any event, he forgot to say how much a Labour Government would spend on improvement grants in their first year in office. The hon. Member for Hammersmith is, as usual, stuck to his seat with glue because he will not say. He wants people to believe that there would be a large budget, but he does not want to tell us what it would be because he knows that he would not get his colleagues' approval for it.

Mr. George Howarth: The hon. Gentleman has overlooked the fact that we are not yet the Government, although we will be soon. Will he enlighten us: what does he think the size of the Government's budget for improvement grants will be next year?

Mr. Hughes: During the past 10 years, there has been a large increase in those budgets, and I see no sign that there will be a reduction in them. Speeches from my hon. Friends the Ministers have contained firm commitments to improving the condition of the housing stock. But we want to ensure that that money is spent where it is needed.

Mr. McCartney: My local authority has just completed a period of negotiation with the Government over such matters. There is a 20 per cent. reduction in the level of grant provided for work that the Government say it is absolutely necessary for my local authority to carry out in the next financial year. There has, in the Government's figures, been a 20 per cent. reduction. For my local authority, more than £1 million worth of grant has been lost for possible renovation in the private sector. That does not give any credence to the hon. Gentleman's argument that the Government are promoting development and putting resources into private sector housing through local authority grants.

Mr. Hughes: The hon. Gentleman comes from the Paul Daniels' school of politics where, hey presto, money can be conjured out of anywhere. The answer to the hon. Gentleman is that it is too early to say. The grants of which I am speaking are mandatory. People on low incomes will be entitled to help with up to 100 per cent. of the cost of the work, not 90 per cent. of the cost as before. Therefore, it is impossible to say how much the budget will be.
If one believed the rhetoric of the hon. Member for Hammersmith, one would assume that a Labour Government would want to ensure that such discretionary grants were mandatory. When the Opposition spokesman winds up, I would be interested to know if that is Labour policy. What will its policy be towards those discretionary grants to improve homes above the basic fitness standard? Such grants should not be mandatory grants from local authorities. Is it the Labour policy that they should, and how much money is the Labour party prepared to put behind that idea to make it a reality?

Mr. John Bowis: Is it not also a fact that there will now be mandatory grants to allow the disabled to have the necessary adaptations to their own homes to enable them to stay in them? Is not that a sign of a caring Government, and is it not a pity that the last Labour Government did not put that policy into practice when they had the chance?

Mr. Hughes: I am grateful to my hon. Friend because, for the first time, grants to disabled people to ensure that they have the facilities that they need will be mandatory. One would have thought from the rhetoric that its Members are using this evening that 11 years ago the Labour party would have thought of that, and would have put it into effect.
When we discussed the matter in Committee and considered the various options before us, we realised that there were a number of ways in which to introduce an improved scheme for home improvements. We could say that there are some spheres in which we want improvements to be made, and that beyond that people should pay for the improvements themselves. We all know the sort of area about which we are talking. We want properties to be bought up, and we do not want any of the houses or flats to be left out. The argument leading to that conclusion suggests that, if dwellings were left out, it could

lead to pepper-potting—there would be good houses, and unfit houses. It is an attractive argument, but I am glad that the Government did not pursue it.
I am glad that the Government chose the policy they did because I think that it is important that those people on poor incomes, living in unfit houses, and with no means or reasonable income, should be entitled to a grant paying for the whole cost of the work, as of right.
This is an important scheme. The Government were right to introduce it, and I certainly hope that my hon. Friends will support them in the Lobbies tonight.

Mr. Richard Livsey: I do not possess the mastery of statutory instruments of the hon. Member for Bradford, South (Mr. Cryer), but I have grave doubts about some of the principles in the regulations.
The grants fall into two categories: mandatory grants, which, as long as the statutory requirements are met, the council is obliged to pay; and discretionary grants, when the council can decide which type of work to assist and which class of applicant to help. The percentage of such grants can be altered, too.
The retrograde principle behind the new system—it represents a major change—is that all applicants for grants will be means tested. That cannot be good. Applicants will be eligible for grant if their resources, including income and capital, are below certain thresholds. The danger lies in where those thresholds are set; on that depends which people will fail to get a grant—to say nothing of the £20 top-up.
Discretionary grants will be available for works that bring properties up to target standards. Much of the debate has centred on those targets. Mandatory grants are available on top of renovation grants provided to disabled people.
The transmission of resources to where they are most needed is desirable, but the targets in this case should apply to properties, not people. That has not been sufficiently discussed so far. In Wales, where many of the houses were built before 1919, many properties are substandard and the housing stock is in extremely bad shape, although I concede that much good work has been done to bring it up to standard. There is still, however, a long way to go.
The means tests are usually excessively restrictive and degrading, and they always throw up anomalies. The forms are long and intrusive and they represent an obstacle course for people at the bottom of the pile who have to thread their way through them. Many give up at the first hurdle. The test is modelled on the housing benefit scheme, and it may exhibit similar problems.
The proposed scheme is cumbersome and labour-intensive. It is estimated that it will increase local government's workload by at least 15 per cent. due to the administration of applications and the surveying and assessment of properties.
We believe that the £20 top-up is not generous enough. It should be at least doubled. It will certainly not cover the many necessary outgoings—over and above the usual expenses—that a household may face. High interest and mortgage rates have not even been taken into account—

Mr. McCartney: It is likely that more than 300 houses in mining villages in the area of my local authority—they are part of a ribbon development there—will need


renovation just to stop them being demolished. At £8,000 a house, that will cost nearly £2.5 million. Another 9,000 houses have been designated by the Government and the local authority as requiring initiatives to prevent them from being demolished. My local authority has had a 20 per cent. reduction in its grant for dealing with those issues. Having recognised the problem, the Government then decide to reduce—

Madam Deputy Speaker (Miss Betty Boothroyd): Order. Is the hon. Gentleman making a speech or an intervention? If it is an intervention, I hope that he will conclude it at once.

Mr. McCartney: It is an intervention, Madam Deputy Speaker, but if you wish me to make a speech I shall do so. I always abide by your rulings, Madam Deputy Speaker. Local authorities and the Government have identified the problem. However, the Government have reduced the resources needed by local authorities to deal with it.

Mr. Livsey: The hon. Gentleman makes a telling intervention, which could be described by some as a telling speech. Areas such as those represented by the hon. Gentleman and other hon. Members have problems with housing stock. The hon. Gentleman has rightly said that considerable resources are required to tackle those problems. Councils are struggling to put right housing that is falling down around them.
The proposal to disregard £5,000 of savings is not generous enough for people such as the elderly and the disabled who may rely on their life savings to supplement their income. Some people have no prospect of replacing their savings. Perhaps people such as the elderly and the disabled should be totally exempt from the means test. I object in principle to such a test and a cogent case against it can certainly be made for the elderly and the disabled. Its removal would reduce the work load on local authorities and lift a burden from people's shoulders.
The loans test is applied across the board whether or not a person is considered to be a good risk, and many elderly, disabled and other people may find that loans are denied to them. That is unfair. In theory, the scheme has potential for good, especially for the elderly, because it holds out the prospect of a 100 per cent. grant. However, without adequate funds the system, or part of it, may grind to a halt, and I fear that that will happen to the renovation grants scheme.
The scheme will limit the number of people who are eligible for grant and its complex system of means testing will exclude people in need. It is a cynical exercise in cost saving at the expense of poor people. Apart from the problems that face people, many properties are in need of renovation in their own right. The housing stock will continue to deteriorate because assistance will be available for fewer properties. The regulations are inappropriate, mainly because of their element of means testing. The regulations are also unfair and will not tackle a serious social problem.

Mr. George Howarth: I shall deal first with the questions posed by the hon. Member for Harrow, West (Mr. Hughes). We welcome the provision for discretionary grants and we shall extend it in

legislation. Obviously, I am not prepared to say what a Labour Government would be able to afford in two years. Neither the hon. Gentleman nor the Government know what next year's Budget will be and would not tell us if they did. Over time, we would want the home insulation grant to become mandatory.
My hon. Friend the Member for Makerfield (Mr. McCartney) highlighted the position of his constituents in Wigan, and of people in the north-west, as a result of the statutory instrument and the legislation.
My hon. Friend the Member for Bradford, South (Mr. Cryer), through the Select Committee on Statutory Instruments, made some trenchant criticisms about the sloppy drafting of the measure and its defects. It is all of a piece with this Government and the way in which they deal with housing. It is a long-standing series of incompetent measures, all of which have been compounded by the regulations and orders that have followed. It is sad, although not surprising, that again the Government have missed the opportunity to do something useful.
My hon. Friend the Member for Hammersmith (Mr. Soley) cited figures from the 1986 house condition survey and its conclusions on properties lacking in basic amenities or in fitness, or which were in serious disrepair. More than 14 per cent. of the properties covered by the survey fall into one or other of those categories. That is bad enough in itself, and it gives a clear picture of the problems with the housing stock.
My hon. Friend described the effects of the statutory instrument and noted that those on a net income of between £8,000 and £12,800 would suffer a grant reduction of, in the former case, from 75 per cent. to 53 per cent. and, in the latter case, to 1 per cent. on an £8,000 repair.
If we juxtapose those figures with the figures in the 1986 house condition survey, 20 per cent. of the households that need one or other of the categories of major repair will be caught within the trap of this measure. Many households—not large-income, but low-income households—will fall outside the scope of eligibility for assistance with necessary works.
Even the capital cut-off in the measure is at odds with other areas of Government policy. In this case, it becomes operative at £5,000; it is £8,000 for income support and family credit and £6,000—we all know the background to this—for housing benefit and the poll tax. There is a series of different capital cut-off points applying to different areas of benefit. That will inevitably put many more people outside the rules within which they can apply for grant to carry out essential works.

Mr. Chope: Does the hon. Gentleman accept that there is no cut-off point for the new renovation grants?

Mr. Howarth: I shall check that, but it is not my understanding of the measure. Perhaps the Minister can tell me where it makes that point clear.

Mr. Chope: The £5,000 is a starting point, and it is a more generous starting point than under housing benefit. There is no cut-off point. There is a sliding scale right up the capital range.

Mr. Howarth: That is not my reading of it. I shall check and, if the hon. Gentleman is right, I shall write to him.
Schedule 1 to the reduction of grant regulations allows for an additional premium in certain circumstances. In


particular, these premiums apply to the disabled, to those designated as higher premium pensioners—those over 75—and to certain other disadvantaged people. The regulations allow for an additional premium to be paid to certain categories, which, in effect, increases the home improvement grant payable to the disabled.
All these premiums relate to the basic principle of means testing. Therefore, unless those basic principles are set out fairly, the corresponding premiums will be affected by the anomaly of the basic means test. For that reason, it is important to try to overturn the two requirements identified, but there is an added argument in relation to the knock-on effect that this will have on the disabled and other disadvantaged persons.
Ministers gave particular assurances about the disabled to both Houses of Parliament, and only after assurances in the House of Lords was the primary legislation for the means-testing principle passed. I do not believe that the regulations as laid meet those assurances. For that reason, they are unsatisfactory.
The Government have been making soothing noises to local authorities, telling them that £54 million is available for supplementary bids so that extra work can be carried out. As I understand it, the local authorities in my area alone, Merseyside, would need to take up £14 million of that money. By extrapolation, we see that that money will not be adequate to cover the shortfalls. The Government should again consider the amount that they are soothingly telling local authorities to apply for.
I started by saying that this incompetence built upon inactivity is all of a piece with this Government. My hon. Friends have referred to the sloppy drafting of the regulations. The Statutory Instruments Committee pointed that out at some length and in great detail. The system must be altered soon because it does not meet the country's needs. It will be changed—by a Labour Government—and the sooner the better.

The Parliamentary Under-Secretary of State for the Environment (Mr. Christopher Chope): I commend the regulations to the House. They are the basis of a much improved system. There has been some criticism of the drafting of the regulations. As I pointed out, they are drafted in line with the housing benefit regulations. It is easy to criticise them and say that the drafting is inadequate, but I am sure that the Government would be equally criticised if they were to have detailed regulations covering a matter similar to housing benefit and were to have inconsistent language.
The Government have consistency in these regulations. That does not mean that the drafting of regulations can never be improved. The points made by the hon. Member for Hammersmith (Mr. Soley) will be taken into account in further drafts of these and the Housing Benefit (General) Regulations 1987. The criticism of the drafting of these regulations is particularly ill-placed and harsh.

Mr. Rooker: I just left the Chamber and posted the regulations, including the one with the prescribed forms, to Roger Clarke, the manager of the urban renewal section in my constituency. I told him that the Department of the Environment can be quite proud of these regulations, because they will bring any decent urban renewal scheme to a halt.
I should like the Minister to explain to the House how he expects ordinary citizens—landlords, tenants and owner-occupiers—to get round the prescribed form regulations in time for new schemes approved by his Department to start next April. If the Minister cannot give a guarantee that that will happen, it is gross deceit on the part of the Department. The Minister knows what is happening in the centre of Birmingham. If the schemes are not put in and approved by September or October this year, they will not start next year. Thousands of people will be bitterly disappointed because they will have been led up the garden path by the Minister and his colleagues.

Mr. Chope: That was a long intervention as the hon. Gentleman did not take the opportunity to make a speech during the debate. His point is unnecessary scaremongering and is based on a misunderstanding of the true position. The facts are set out clearly in the circular of guidance and in the booklet, two million copies of which have been made available for ordinary people who wish to take advantage of the new and far more generous system of renovation grants.
Throughout the debate there has been a misunderstanding by the Opposition of the rules about capital disregards. Regulation 37 provides for a tariff income to be calculated in respect of capital in excess of £5,000 only. That is more generous than under the housing benefit regulations. There is no cut-off point. Reference has been made to the cut-off points of £8,000 and £16,000, but there is no cut-off point under the regulations. That is why I can say, fairly, that they are more generous.

Mr. Soley: Inasmuch as I originally used the phrase "cut-off", the Minister is correct. It is not a cut-off; it is a taper. This is important, as the Minister will know, because, first, one could use the same base as one does for other capital starting points and, secondly, and more importantly, the regulation tapers off—if the Minister prefers that phrase—the amount until the point where one gets only 1 per cent. towards the grant when one is still on a very low income. I gave the example of a person on £191 a week who would receive only 1 per cent. grant.

Mr. Chope: That would not apply to a person on a very low income or to a person who has very low capital resources. The new system will give 100 per cent. grants to people, which was not possible under the old system. That is why the new system is properly targeted to those in greatest need. Unlike the old system, under which people could receive only a 90 per cent. grant up to a maximum amount for the works, the new system has no limit on the maximum amount of works that can be carried out. Thus, for example, a person on a low income who had low capital might be able to obtain £20,000 as a 100 per cent. grant for works that were carried out. There are many worked examples that show just how generous the new system will be. It is rather odd that the Opposition should try to suggest that the system is other than generous.
Under the new system, there is also minor works assistance which will be available especially for the benefit of the elderly. That will be available to help with insulation work, about which the hon. Member for Hammersmith was concerned. The new system takes account of that. However, it does not—and I do not think it should—give every person 100 per cent. grant, as of right, for insulation work. Under the new system, people can receive grant assistance if they are in particular need, and I should have


thought that that was a far fairer and more sensible way in which to distribute scarce resources belonging to the taxpayer.
The Labour party has throughout been rather against means testing. Tonight, the only outright opposition to means testing was from the hon. Member for Brecon and Radnor (Mr. Livsey). However, just in case there are people who still belong to the Labour party who think that the Labour party is against means testing and, by implication, against means testing for renovation grants, I should remind the House that the hon. Member for Dagenham (Mr. Gould) told the Institute of Housing conference a few weeks ago that the Labour party still supported means testing and that all it was thinking about was "rejigging the means test". That is the expression that the hon. Gentleman used. He looks puzzled; perhaps he does not read his own speeches. That points to a further area of confusion in the Labour party's policies. It will try to make everybody believe that 100 per cent. grants will be available for everybody without any means test, but it is clear that it recognises that it is much fairer to have a system of means testing.
As my hon. Friend the Member for Harrow, West (Mr. Hughes) made clear during his important contribution to the debate, the Government's record on improving the nation's housing stock is exemplary and stands comparison with the record of any previous Labour Government. My hon. Friend understated the position. He said that there had been a 50 per cent. increase in real terms in the resources put into home renovations last year compared with 10 years ago. In fact, there has been a 100 per cent. increase in real terms in the money put into home improvements. That is why in the legislation we have been able to extend the categories and definitions so that more properties can be defined as unfit. In that way we can further improve the quality of the housing stock.
I predict that it will not be long before Opposition Members suggest that there has been a dramatic increase in the number of unfit properties during the lifetime of the Government. Opposition Members are nodding already. The numbers will have increased because we have widened the criteria and, thereby, improved the standards. That shows the way in which—dare I say it—the Opposition are prepared to resort to a form of cheating in their selective use of statistics.
Since 1979 more than £4 billion has been spent on more than 1.2 million grants to help people improve and renovate homes in the private sector. Spending has increased significantly. One of the most important parts of the new regulations is the major new assistance they provide for the disabled. The elements of the grants for the disabled have been widely recognised and accepted as being helpful to the disabled. They fit in well with the Government's policies on care in the community and enabling people to stay in their own homes. I am sorry that during the debate no Opposition Member has praised the new system and given credit where it is due.
It is worth pointing out that a newspaper that is not normally very generous in its support for Government policies carried an article last month with the heading, "Home improvement grants better". It said:

A more generous system of home improvement aid to be launched on July 1 features mandatory grants of up to 100 per cent. of repair and renovation costs for both the low-paid and the disabled.
Housing experts have welcomed the new system as a distinct improvement".
I do not know whether that journalist will continue in employment with The Guardian after writing that article. If The Guardian thinks that the new system is better, it is churlish of the Opposition not to be prepared to accept the major improvements that have been introduced.
I commend the regulations to the House. I hope that hon. Members of both sides of the House will support them in the Lobby. As there are a couple of minutes left, I shall tell the House of a fully worked example which shows how generous the new system is. An elderly couple aged over 60, one of whom is disabled and receives an attendance or mobility allowance and with a net weekly income of £130—totalling about £6,779 a year—would be able to obtain a grant of £18,285 for works costing £20,000. That is generous in anybody's language. I commend the regulations to the House.

Question put:—

The House divided: Ayes 131, Noes 182.

Division No. 300]
[11.30 pm


AYES


Allen, Graham
Gould, Bryan


Alton, David
Graham, Thomas


Archer, Rt Hon Peter
Griffiths, Nigel (Edinburgh S)


Armstrong, Hilary
Griffiths, Win (Bridgend)


Ashdown, Rt Hon Paddy
Heal, Mrs Sylvia


Ashton, Joe
Hinchliffe, David


Barnes, Harry (Derbyshire NE)
Home Robertson, John


Barron, Kevin
Hood, Jimmy


Beckett, Margaret
Howarth, George (Knowsley N)


Beggs, Roy
Hoyle, Doug


Blunkett, David
Hughes, John (Coventry NE)


Bradley, Keith
Hughes, Robert (Aberdeen N)


Brown, Gordon (D'mline E)
Hughes, Simon (Southwark)


Buckley, George J.
Jones, Barry (Alyn &amp; Deeside)


Caborn, Richard
Jones, Martyn (Clwyd S W)


Callaghan, Jim
Lamond, James


Campbell, Menzies (Fife NE)
Leadbitter, Ted


Campbell-Savours, D. N.
Livsey, Richard


Canavan, Dennis
Lloyd, Tony (Stretford)


Carr, Michael
Lofthouse, Geoffrey


Clark, Dr David (S Shields)
McAllion, John


Clay, Bob
McAvoy, Thomas


Clelland, David
McCartney, Ian


Clwyd, Mrs Ann
McFall, John


Corbett, Robin
McKelvey, William


Corbyn, Jeremy
McLeish, Henry


Cousins, Jim
McNamara, Kevin


Crowther, Stan
McWilliam, John


Cryer, Bob
Madden, Max


Dalyell, Tam
Maginnis, Ken


Darling, Alistair
Mahon, Mrs Alice


Davies, Ron (Caerphilly)
Marek, Dr John


Davis, Terry (B'ham Hodge H'l)
Marshall, David (Shettleston)


Dewar, Donald
Marshall, Jim (Leicester S)


Dixon, Don
Martin, Michael J. (Springburn)


Dunnachie, Jimmy
Martlew, Eric


Eastham, Ken
Meale, Alan


Evans, John (St Helens N)
Michael, Alun


Ewing, Harry (Falkirk E)
Michie, Bill (Sheffield Heeley)


Ewing, Mrs Margaret (Moray)
Mitchell, Austin (G't Grimsby)


Fields, Terry (L'pool B G'n)
Molyneaux, Rt Hon James


Flynn, Paul
Morgan, Rhodri


Foster, Derek
Morley, Elliot


Foulkes, George
Murphy, Paul


Fyfe, Maria
Nellist, Dave


George, Bruce
O'Brien, William


Gilbert, Rt Hon Dr John
O'Neill, Martin


Godman, Dr Norman A.
Parry, Robert


Golding, Mrs Llin
Patchett, Terry






Pike, Peter L.
Steel, Rt Hon Sir David


Powell, Ray (Ogmore)
Steinberg, Gerry


Prescott, John
Strang, Gavin


Primarolo, Dawn
Taylor, Mrs Ann (Dewsbury)


Quin, Ms Joyce
Turner, Dennis


Redmond, Martin
Vaz, Keith


Reid, Dr John
Wardell, Gareth (Gower)


Rogers, Allan
Wareing, Robert N.


Rooker, Jeff
Watson, Mike (Glasgow, C)


Ross, Ernie (Dundee W)
Welsh, Michael (Doncaster N)


Ross, William (Londonderry E)
Wilson, Brian


Rowlands, Ted
Winnick, David


Salmond, Alex
Wise, Mrs Audrey


Shore, Rt Hon Peter
Young, David (Bolton SE)


Skinner, Dennis



Smith, Andrew (Oxford E)
Tellers for the Ayes:


Snape, Peter
Mr. Frank Haynes and


Soley, Clive
Mr. Allen McKay.


Spearing, Nigel





NOES


Alexander, Richard
Fishburn, John Dudley


Alison, Rt Hon Michael
Forman, Nigel


Amess, David
Forsyth, Michael (Stirling)


Amos, Alan
Forth, Eric


Arnold, Jacques (Gravesham)
Fox, Sir Marcus


Arnold, Sir Thomas
Franks, Cecil


Atkins, Robert
Freeman, Roger


Atkinson, David
French, Douglas


Baker, Rt Hon K. (Mole Valley)
Garel-Jones, Tristan


Baldry, Tony
Gill, Christopher


Batiste, Spencer
Glyn, Dr Sir Alan


Beaumont-Dark, Anthony
Goodlad, Alastair


Bellingham, Henry
Goodson-Wickes, Dr Charles


Bennett, Nicholas (Pembroke)
Gorman, Mrs Teresa


Benyon, W.
Gow, Ian


Bevan, David Gilroy
Greenway, John (Ryedale)


Boscawen, Hon Robert
Gregory, Conal


Bowden, A (Brighton K'pto'n)
Griffiths, Peter (Portsmouth N)


Bowden, Gerald (Dulwich)
Grist, Ian


Bowis, John
Ground, Patrick


Braine, Rt Hon Sir Bernard
Grylls, Michael


Bright, Graham
Hague, William


Brown, Michael (Brigg &amp; Cl't's)
Hamilton, Hon Archie (Epsom)


Bruce, Ian (Dorset South)
Hamilton, Neil (Tatton)


Buck, Sir Antony
Hampson, Dr Keith


Burt, Alistair
Hanley, Jeremy


Butcher, John
Hannam, John


Butterfill, John
Hargreaves, Ken (Hyndburn)


Carlisle, John, (Luton N)
Harris, David


Carlisle, Kenneth (Lincoln)
Haselhurst, Alan


Carrington, Matthew
Hawkins, Christopher


Carttiss, Michael
Hayes, Jerry


Channon, Rt Hon Paul
Hayhoe, Rt Hon Sir Barney


Chapman, Sydney
Hayward, Robert


Chope, Christopher
Hicks, Robert (Cornwall SE)


Clarke, Rt Hon K. (Rushcliffe)
Hind, Kenneth


Coombs, Anthony (Wyre F'rest)
Howard, Rt Hon Michael


Cran, James
Howarth, G. (Cannock &amp; B'wd)


Currie, Mrs Edwina
Howell, Ralph (North Norfolk)


Curry, David
Hughes, Robert G. (Harrow W)


Davies, Q. (Stamf'd &amp; Spald'g)
Hunt, Sir John (Ravensbourne)


Davis, David (Boothferry)
Hunter, Andrew


Day, Stephen
Irvine, Michael


Devlin, Tim
Jack, Michael


Dorrell, Stephen
Janman, Tim


Douglas-Hamilton, Lord James
Jessel, Toby


Dover, Den
Johnson Smith, Sir Geoffrey


Dunn, Bob
Jones, Gwilym (Cardiff N)


Durant, Tony
Jones, Robert B (Herts W)


Evennett, David
King, Roger (B'ham N'thfield)


Fairbairn, Sir Nicholas
Knapman, Roger


Fallon, Michael
Knight, Greg (Derby North)


Favell, Tony
Knowles, Michael


Fenner, Dame Peggy
Knox, David





Lang, Ian
Spicer, Michael (S Worcs)


Lawrence, Ivan
Stern, Michael


Lester, Jim (Broxtowe)
Stevens, Lewis


Lightbown, David
Stewart, Andy (Sherwood)


Lord, Michael
Stradling Thomas, Sir John


MacGregor, Rt Hon John
Summerson, Hugo


MacKay, Andrew (E Berkshire)
Taylor, Ian (Esher)


Maclean, David
Taylor, John M (Solihull)


McLoughlin, Patrick
Temple-Morris, Peter


McNair-Wilson, Sir Patrick
Thompson, D. (Calder Valley)


Malins, Humfrey
Thompson, Patrick (Norwich N)


Mans, Keith
Thorne, Neil


Martin, David (Portsmouth S)
Thornton, Malcolm


Maude, Hon Francis
Townend, John (Bridlington)


Mawhinney, Dr Brian
Tracey, Richard


Mayhew, Rt Hon Sir Patrick
Twinn, Dr Ian


Meyer, Sir Anthony
Walden, George


Mitchell, Andrew (Gedling)
Walker, Bill (T'side North)


Moss, Malcolm
Waller, Gary


Nelson, Anthony
Ward, John


Nicholls, Patrick
Wardle, Charles (Bexhill)


Nicholson, David (Taunton)
Warren, Kenneth


Norris, Steve
Watts, John


Raffan, Keith
Wells, Bowen


Renton, Rt Hon Tim
Wheeler, Sir John


Riddick, Graham
Whitney, Ray


Ridsdale, Sir Julian
Widdecombe, Ann


Rifkind, Rt Hon Malcolm
Wilkinson, John


Roberts, Sir Wyn (Conwy)
Winterton, Mrs Ann


Rossi, Sir Hugh
Winterton, Nicholas


Rowe, Andrew
Wood, Timothy


Sackville, Hon Tom
Woodcock, Dr. Mike


Shaw, David (Dover)
Yeo, Tim


Shaw, Sir Giles (Pudsey)
Young, Sir George (Acton)


Shelton, Sir William
Younger, Rt Hon George


Shephard, Mrs G. (Norfolk SW)



Shepherd, Colin (Hereford)
Tellers for the Noes:


Smith, Tim (Beaconsfield)
Mr. Irvine Patnick and


Speller, Tony
Mr. Nicholas Baker.

Question accordingly negatived.

PETITION

Post Office, Porthcawl

Mr. Win Griffiths: I beg to ask leave to introduce on behalf of 2,000 of my constituents in Porthcawl a petition that sheweth
That it is proposed to downgrade the Crown Post Office in John Street, Porthcawl in the Borough of Ogwr to that of an Agency Office, and that we, the undersigned, vigorously protest at this proposed downgrading of our local Crown Post Office particularly because Post Office Counters Ltd. cannot guarantee that the Agency Post Office will simply take over the Crown Post Office, and provide for the foreseeable future all of the services currently provided there with staff who are employed on nationally agreed rates of pay and conditions of work. Furthermore, Post Office Counters Ltd. admit the likelihood of the people of Porthcawl losing the experienced, well trained, friendly and efficient staff now in their Crown Post Office whose replacements would not receive the same levels of training as given in Crown Post Offices. Thus the loss of the Crown Post Office and its replacement by an Agency Post Office will not be in the long term interests of the people of Porthcawl.
Wherefore your petitioners pray that your honourable House do urge the Secretary of State for Trade and Industry to intervene in the proposal to downgrade the Porthcawl Crown Post Office to an Agency Office.
And your petitioners as in duty bound will ever pray.

To lie upon the Table.

Hospital Services (Thurrock and Basildon)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Goodlad.]

Mr. Tim Janman: I am grateful for this opportunity to bring to the attention of the House some strong concerns in my constituency about proposals being put forward for the reorganisation of the delivery of acute services by my local health authority. You will be aware, Madam Deputy Speaker, that my hon. Friend the Member for Billericay (Mrs. Gorman) would also like to make a few comments before my hon. Friend the Under-Secretary of State for Health responds to the debate.
The proposals essentially involve the delivery of acute services from the two general hospitals in our health authority area, Orsett and Basildon. The proposals are to centralise accident and emergency care, intensive care, coronary care and general medicine at Basildon, and to centralise all day care surgery and planned surgery at Orsett. The proposals give rise to four particular concerns.
The first is that Orsett, which is currently a general hospital that is held in the highest esteem and affection by my constituents, will become a cold surgery hospital rather than a full general hospital because under the health authority's proposals all warm surgery and general medicine will be centralised in Basildon.
Secondly, the centralisation of all accident and emergency services at Basildon will mean that the 88 per cent. of non-emergency attenders at Orsett from my constituency—many thousands of people every year—will have an extra seven or eight miles of hassle and inconvenience travelling to Basildon, often accompanied by either a young or elderly relative with a fairly serious injury. The irony is that the worst rates of social deprivation in the health authority area are, on the whole, in my constituency—yet those are the people who will have an extra seven or eight miles to travel, often facing severe traffic jams on the A13 at the main roundabout just below Basildon. That is causing a great deal of concern.
It is worth noting that only nine district health authorities in England with a similar or greater population than that of Basildon and Thurrock attempt to provide all their accident and emergency services on one site. Of those nine, only four have a population greater than that which will be attained by the borough of Thurrock and the district of Basildon combined by the end of the current decade.
From the A and E statistics, one can make a case for saying that the borough of Thurrock—that is, my constituency and part of that of my hon. Friend the Member for Billericay—should be its own district health authority. According to a written answer of 24 May, if one takes a ratio of the number of A and E units and the populations of each of the English district health authorities, one discovers that 119 English district health authorities have a population to A and E unit ratio of less than 129:1, which represents the ratio of the population of the borough of Thurrock set against having one A and E unit still maintained at Orsett.
The third major concern about the proposals is the lack of a full intensive therapy unit at Orsett, given that major planned surgeries will be carried out there under the DHA's proposals. When the proposals were first advanced, many consultants in the district health

authority were concerned about that point. It is fair to say that they have been mollified to some degree by some amendments that the DHA has now made to its own proposals, but there will only be a 24-hour intensive therapy unit at Orsett under those proposals. That, again, is a matter for concern.
The fourth major concern is the centralisation of general medical and coronary care at Basildon despite the fact that the five wards with the highest premature death rate for circulatory system diseases are all in my constituency, as are the three highest rates of schaemic heart disease in the district. The three highest rates on a ward by ward basis in the health authority area for this type of heart disease are also in my constituency. Therefore, under the local health authority's proposals the part of the district with the highest percentage of people likely to be needing that care will have to use a hospital that is further away.
The key question is why Basildon and Thurrock district health authority has put forward these proposals. Apparently, it is to save money. Yet Sue Jennings, the acute unit manager for the DHA, has said that if the DHA were to get the extra £1 million tomorrow, which is the amount by which it will be over budget in this financial year, and in all future years henceforth in real terms, she would not want to withdraw the health authority's proposals, but would want to do more planned surgery, such as hip replacements, and to expand other services.
My hon. Friend the Member for Billericay and I have submitted a response to the health authority, which will have arrived there earlier this week, ready for the meeting this Thursday, suggesting that if the proposals of the Basildon and Thurrock health authority are motivated mainly by the desire to get into budget, we feel that a combination of pruning excessive management posts allowing the private sector to utilise spare facilities—hence providing more revenue—and the implementation of the community health council's organisational recommendations, to which I shall turn later, represent a superior methodology for achieving that objective than that proposed by the DHA. Of course, substantial reductions in the number of administrative and clerical staff could also be achieved to that end.
If, on the other hand, the primary objective is to improve service provision, we recommend that the district health authority should agree with the community health council a joint proposal that will find a new consensus among the population and will carry public support, provided that it has the consensus of opinion behind it.
What if the health authority is motivated mainly by the desire to get into budget? My hon. Friend the Member for Billericay and I have examined some aspects of the health authority in some detail. We have examined its management organisation charts. From our experience in business and industry, we believe that 10 posts are superfluous to requirement in the management structure. That is particularly the case in the community care unit. The analysis has been backed up by comments that have been made to us by nurses who work in the unit and by the community health council. We believe that a saving of £300,000 could be made if the 10 posts were axed.
We agree with the community health council that the promotion of 18 staff to neighbourhood managers within the community services unit should be indefinitely postponed. It is our guestimate that that would save a further £75,000.
Between April 1984 and March 1989, the administrative and salary costs for my district health authority rose by 34·8 per cent. Over the same five-year period, the accumulated increase in the retail prices index was only 26·7 per cent. If we compare the numbers of admin staff in the authority with various measurements of patient throughput, we obtain some interesting facts. Using figures that my hon. Friend the Minister gave in a written answer to my hon. Friend the Member for Billericay only last week, in 1985 the number of deaths and discharges in the health authority was 33,300. That rose to 33,710 by 1988—an increase of 1·2 per cent. Over the same period, the number of administrative and clerical staff rose by 6·1 per cent., from 490 to 520. In the period 1988–90, by the health authority's own measurement of throughput, the number of in-patients and day cases at Orsett and Basildon hospitals increased from 38,170 to 39,222—an increase of 2·76 per cent. Yet the number of admin and clerical staff—admittedly, across the whole health authority and not just in the two main hospitals—increased from 520 to 560·72, an increase of 7·8 per cent.
I have used 1985 as the base year—a year well beyond the major boundary changes in district health authorities in the early 1980s. If the number of admin and clerical staff had increased by the same percentage as the throughput in patients from 1985 to 1990, which would give a zero productivity increase, instead of increasing from 490 to 560.72, the number would have increased to only 510.
I am willing to accept that our figures are based on a certain degree of guestimate—neither of us is expert in the matter—but we hazard a guess that 50 posts in the admin and clerical staff could be lost. If those heads went, that would save £400,000. Even with the possibility of some double counting of the management posts to which I referred earlier, it is clear that there are opportunities for considerable savings in the health authority. Certainly, the authority could save more than the £260,000 which the authority said that it would save in the first year under its own proposals. My hon. Friend the Member for Billericay intends to talk about that in a little more detail.
If the motivation behind the proposals is not to get into budget, and if that is being used as a smokescreen simply to reorganise as the authority wants to but which it knows will be unpopular with my constituents, it should make new proposals after holding discussions with the community health council and the family practitioner committee. With those two bodies it should formulate a consensus approach that will carry the population with it. I hope that my hon. Friend the Minister will take note—I am sure that I shall visit him with my CHC on the matter—that my CHC has put forward alternative proposals that include keeping a non-emergency casualty unit at Orsett and centralising general medicine and coronary care at Orsett, not Basildon, but keeping a high dependency unit at Basildon to support the centralisation of emergency admissions at Basildon.
My hon. Friend the Member for Billericay and I support the alternative proposals of the community health council because they are realistic and will maintain, if not improve, the service to the entire area, but especially our respective constituents. That improvement will not be achieved through the DHA proposals. As my hon. Friend the Member for Billericay rightly wishes to speak, I do not have time to say any more about the CHC's counter-proposals, except to emphasise that I support them.
I must strongly reiterate to my hon. Friend the Minister that there is considerable local opposition to the DHA proposals. I respect, of course, its desire to get into budget. In the past five years there has been a consistent real terms increase in the amount of funding that it has received. I find it difficult to believe that that total amount of funding is the problem. Whatever the motivation behind the specific DHA proposals, there is considerable local opposition to them. Nearly 20,000 people have now signed the petition that one of my local newspapers, the Thurrock Gazette, has organised. My hon. Friend should use his powers to put pressure on the DHA to withdraw its proposals and to assess properly its efficiency and its efforts to get administration under control. It should not reduce service provision to my constituents. It should make cuts in the other areas that I have mentioned rather than in the core services.
It would be much better if my hon. Friend could use his influence to bring pressure to bear on Basildon and Thurrock district health authority to withdraw its proposals. It should work with the CHC and the family practitioner committee to decide upon an acceptable way forward that is within budget.
Some of the controversial DHA proposals are supported by medical opinion—for example, the centralising of emergency services provision at Orsett. The CHC has accepted that medical opinion is right in that respect and as a politician I do not think that it is right that I should argue against that opinion.
There are some aspects of the proposals that the CHC and I can accept, but the complete withdrawal of accident and emergency facilities in the borough of Thurrock, particularly in my end of the borough, is unacceptable. The package of proposals is not acceptable and I hope that my hon. Friend will bring pressure to bear to get them withdrawn.

Mrs. Teresa Gorman: I thank my hon. Friend the Member for Thurrock (Mr. Janman) for allowing me time to speak in his Adjournment debate. I also welcome the presence of my hon. Friend the Member for Basildon (Mr. Amess).
My constituency straddles the two main hospitals of Thurrock and Basildon. Those large district hospitals are relatively close together, so that, on paper, one might reasonably ask why we need two main hospitals to service the area. The Thurrock half of my constituency, however, points to the river and is distinct from the other side of my constituency which is on the other side of Basildon, the town in the middle of it. The people in that part of the constituency relate to the Basildon hospital and think quite differently about themselves. Although the two hospitals are geographically close, there is a major motorway between them that must be crossed. At busy times of the day—increasingly that means all day—the motorway is heavily congested. The people of Thurrock view with great concern the prospect of going to Basildon hospital for accident and emergency treatment.
Many people living in the area of Thurrock district have modest incomes and do not have motor cars. Public transport between that part of Thurrock and Basildon hospital is not good, and it is worrying those people that they will have to go to Basildon for accident and emergency treatment.
There has been a great upsurge of concern in the area and I sometimes think that we neglect the fact that the institutions about which we are speaking exist for the people of the area, not for the administrators who wish to make things neat and tidy on paper.
I praise my hon. Friend the Member for Thurrock for the work he has done in looking into the problem, including the detailed financial analysis that he has made. Although it was said that the initial savings would be about £1 million—the figure of £800,000 was mentioned—it would seem in the final analysis that the actual savings as a result of this major change of policy would be little more than £250,000. I am sure that that sum would be dissipated when the changes came into effect, through the provision of new beds and the extra facilities that would have to be provided at Basildon hospital. Those expenses would soon gobble up any money that was saved.
I have talked to the nurses on both sides. They assure me that there are far too many chiefs and not enough Indians—that, as my hon. Friend said, there are too many administrators. Thurrock has one of the fastest growing populations in the country, with a 10 per cent. increase a year, which is five times the national average.
In the Thurrock part of the constituency we have Tilbury docks, one of the major docks, where the chances of accidents happening are relatively high. The accident and emergency unit should be retained in Thurrock. We have Shellhaven and Mobil, the two largest oil terminals in the country, for which accident and emergency services are vital. We also have the development of the Thurrock-Dartford bridge to supplement the tunnel, the development of an enormous shopping centre and a new town of almost 8,000 dwellings, the Chafford Hundreds.
For all those reasons, the facilities for accident and emergency treatment should be retained in the Thurrock part of the constituency. We have in the past agreed to amalgamate gynaecological services. We have discussed the prospect of the people of Basildon having to go to Thurrock for what is known as cold surgery, which is a curious term for long-term surgery. We have the prospect of people needing emergency surgery having to go all the way from Thurrock to Basildon. That is not the way to treat people, remembering that this is their health service.
We want to keep the people of Thurrock safe with their own accident and emergency service. I hope that the Minister will respond positively to that request.

The Parliamentary Under-Secretary of State for Health (Mr. Stephen Dorrell): I wish at the outset to congratulate my hon. Friends the Members for Thurrock (Mr. Janman) and for Billericay (Mrs. Gorman)—but particularly my hon. Friend the Member for Thurrock—on raising this issue and on expressing clearly the concerns of their constituents about the proposals that have been put forward by the health authority.
My hon. Friend the Member for Thurrock has a reputation—it was drawn to my attention soon after taking up my present duties—as an assiduous advocate of his constituents' interests. There could be no better illustration of that than the detailed presentation—my hon. Friend the Member for Billericay will not mind my saying that, for while both my hon. Friends signed the

presentation, it reflects the detailed work that has been done by my hon. Friend the Member for Thurrock—that he has made as background to the representations that he has been making on behalf of his constituents as a result of the concern that they have expressed about the proposals.
My hon. Friend has taken up these matters in private, as well as in the House tonight, and because I regret to say that I doubt whether what I shall say tonight will conclude the matter, I confidently expect my hon. Friend to continue to pursue his campaign in the coming weeks.
As my hon. Friend said, the reason for this debate is that the health authority issued a consultation document this April and is currently out to consultation on the proposals contained in it. I shall not weary the House with a recital of the document's contents, but I should observe at the outset of my speech that if the objections that have so far been maintained by the community health council are maintained throughout the system, the proposal will land on Ministers' desks. Therefore, I hope that both my hon. Friends will appreciate that I am constrained in what I can say about the merits of particular proposals because they seem to be set fair to land on Ministers' desks and I must not prejudge the outcome of that decision-making process. If it comes to that, I am sure that both my hon. Friends will wish to put their views again, and I shall ensure that there is ample opportunity for them to do so.
I must emphasise that the drift of health service management in recent years—this is not unique to the health service—has consistently been to try to delegate decisions further down the line. When, in the health service or anywhere else, one tries to delegate decisions, those at the top of the service must recognise that occasionally the managers to whom decisions are delegated will make decisions with which those at the top may disagree.
In those circumstances, the burden of proof placed on anyone wishing to encourage a Minister to overturn the decisions taken by a delegated manager is, rightly, heavy. My hon. Friends must show not only that if I were in that manager's position I should do as my hon. Friends advocate, but that their arguments are so weighted that they should overturn my natural preference for a delegated system of management and support their propositions.
My hon. Friends have been elegant in expressing the concern about the proposal within their constituencies. But there is no proposal to close Orsett hospital. On the contrary, there is a proposal to change its role in a way that my hon. Friends and their constituents find unsatisfactory, and their reasons for doing so were expressed by my hon. Friends. It is important for everyone to understand that there is common ground between the health authority and my hon. Friends, and their constituents, about the importance of maintaining hospital facilities, both at Basildon and at Orsett, which is not in dispute.
There is an obvious worry that the residents of the Thurrock district will have to travel to the Basildon end of the health authority district. As both my hon. Friends stressed, when considering whether that is an appropriate arrangement, the health authority and, ultimately, perhaps Ministers will have to bear in mind that there is a concentration of disadvantaged areas in the Thurrock end of the district. As my hon. Friend the Member for Billericay stressed, there is also a concentration of industrial plants that might give rise to industrial


accidents. Those factors undoubtedly have to be taken into account, principally by the health authority and, if necessary, by Ministers, when reaching decisions.
Without prejudicing what we as Ministers might conclude if the proposal reached our desks, I shall say a few words about the basic arguments that my hon. Friends advanced against the health authority's proposal. First, there are financial arguments. I am glad that it is common ground between both my hon. Friends and me that the health authority has a clear obligation, which it must discharge, to ensure that its financial affairs are properly managed and its budgets are properly balanced. That is the only basis on which we can achieve a proper distribution of resources throughout the health service, and it is an entirely proper discipline for health service managers at all levels to insist upon.
It is also worth remembering that Basildon and Thurrock health authority has closed the gap between its spending level and the national target defined by RAWP; the gap was 11 per cent. seven years ago, but today the authority is on its RAWP target. That shows that there has been effective management of resources.
My hon. Friend the Member for Thurrock emphasised what he felt to be the scope for savings on administrative and clerical staff, suggesting that 50 heads could be saved at a total saving of £400,000. I do not dismiss that argument. If the issue came to Ministers' desks, we would carefully consider it.
My hon. Friends should also recognise that when the health service recruits additional managers, it does so in the belief that the extra management effort contributed by administrative and clerical staff will release resources for better use elsewhere in the service. That can arise in two ways: by clerical staff taking over administrative functions previously carried out by clinicians, with the result that a

higher proportion of clinicians' time is available for patient contact; and by ensuring that other resources are more effectively managed and that any management posts created should achieve a considerable improvement in the effective use of resources in the service. It has been one of our purposes since 1979 to ensure that health service resources are more effectively used. One manifestation of that is the extra investment that we have made in management.
The second leg of my hon. Friend's argument was that, whatever the arguments about budgetary balance, the health authority may believe that these changes are necessary anyway. He stressed the advantages of looking for a consensus with the CHC. It undoubtedly has a role to play in this; I welcome the fact that it is involved in constructive dialogue on the way forward for the health authority.
Ultimately I am sure that my hon. Friends will recognise that it is for the managers of the authority to decide how best to provide patient care and proper financial discipline in the health authority's area.
It seems that the case may well come to Ministers. I can assure my hon. Friends that we shall carefully weigh the arguments that they have advanced tonight. We shall provide ample opportunity for them to develop them in private, and I am sure that they will take up that offer. Our objective will be to ensure that the health authority maintains proper financial standards and disciplines; and, much more importantly, that the resources used by the health authority are used to clinical effect in its area.

The motion having been made after Ten o'clock, and the debate having continued for half an hour, MADAM DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at twelve minutes past Twelve o'clock.